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Burundi—Letter of Intent Bujumbura, September 3, 2001 The following item is a Letter of Intent and a Memorandum of Economic and Financial Policies of the government of Burundi. It is being made available on the IMF website by agreement with the member as a service to users of the IMF website. This memorandum describes the policies that Burundi is implementing in the framework of a staff-monitored program. A members's staff-monitored program is an informal and flexible instrument for dialogue between the IMF staff and a member on its economic policies. A staff-monitored program is not supported by the use of the Fund's financial resources; nor is it subject to the endorsement of the Executive Board of the IMF.   Mr. Horst Köhler Managing Director International Monetary Fund Washington, D.C. 20431 U.S.A. Dear Mr. Köhler: 1.  The attached memorandum on economic and financial policies (MEFP) reviews developments in 2000 and progress made in managing government finances since the lifting of the embargo imposed on Burundi from mid-1996 to early 1999. It sets out the objectives of the economic program for the rest of 2001 and the economic policies and reforms that we have already begun to implement following discussions with the staff of the International Monetary Fund (IMF) in Paris in February 2001. The government of Burundi asks the staff of the IMF to assist it in implementing its program and in monitoring progress in the context of a six-month staff-monitored program (SMP). We hope that successful implementation of this SMP will lead to the adoption of a program that could be supported by the use of IMF resources.

2.  The government's economic and financial policies aim at improving the public finances through stepping up tax revenue collection and containing current expenditure. The policies also aim at improving the quality of public expenditure and enhancing the transparency of financial management and governance in general. These policies, and the implementation of the government's structural reform program, for which the priorities have been defined in collaboration with the World Bank, should make it possible to stimulate the economy, contribute to the creation of jobs, and improve the living conditions of the most impoverished segments of the population, once lasting peace has been achieved. 3.  In view of the difficult budgetary and balance of payments outlook for 2001 and the medium term, the government will pursue its fiscal consolidation efforts in the coming years. It is clear, however, that given the sizable needs, both to finance the economy and to cover demobilization, reconstruction, and the heavy external debt-service burden, substantial financial assistance from the international community will be essential this year and in the medium term to support the efforts of the government of Burundi. 4.  The technical memorandum of understanding (TMU), which is also attached, sets out the conditions for monitoring the economic program and the reporting requirements, as well as the program's quantitative indicators and structural performance indicators. It details the data that the government undertakes to provide monthly to the staff of the IMF. 5.  The government believes that the economic and financial policies described in the MEFP are sufficient to achieve the objectives of the program. It will maintain close relations with the staff of the IMF and consult with them, of its own accord or at the request of the senior management of the Fund, on its economic and financial policies, including any additional measures that may prove necessary to achieve the program objectives. Sincerely yours, /s/ Charles NIHANGAZA Minister of Finance   Memorandum of Economic and Financial Policies of the Government of the Republic of Burundi I.  Introduction 1.  Eight years of war and the adverse effects of the embargo imposed from July 1996 to January 1999 have drained Burundi's economy, weakened its administrative capacity, destroyed basic infrastructures and the economic base, and caused heavy losses in terms of human lives and the displacement of persons. During the period 1993-2000, economic activity contracted by 20 percent in real terms causing a sharp decrease in per capita income. Domestic and external financial imbalances increased and the external position worsened with the level of official reserves falling from the equivalent of 10 months of imports of goods and nonfactor services in 1993 to 3 months in 2000. As a result of weak tax revenue performance and a reduction of foreign grants in a context of increased war efforts, the overall fiscal deficit (on a commitment basis and including grants) widened from 3.5 percent of GDP in 1993 to 7.5 percent of GDP in 1999 before receding to 2 percent in 2000 when measures were taken to reduce spending. Shortages of foreign exchange and the subsequent depreciation of the domestic currency on the parallel market, combined with an expansionary monetary and credit policy, revived inflationary pressures in the economy. Consequently, inflation, measured by the average change in the consumer price index, accelerated to over 24 percent in 2000, compared with less than 2 percent in 1992. 2.  As regards the political and security situation, the Arusha Peace and Reconciliation Agreement, signed in Tanzania in August 2000 among the government, the National Assembly, and most of the political parties, had raised hopes of a quick return to peace. However, the refusal of two major rebel groups to participate in the peace and reconciliation process dashed those hopes, and the fighting continued, sometimes intensely. The security situation therefore remained tense, forcing the government to devote a large share of its scarce resources to military and security spending. Nevertheless, various recent initiatives and mediation efforts by President Mandela (appointed Facilitator following the death of President Nyerere) have renewed hopes for an end to the crisis in Burundi and the installation of a provisional government, as provided for in the agreement signed in August 2000. II.  Recent Developments 3.  In 2000, economic activity continued to be adversely affected by the drought and total output contracted for a second consecutive year. Based on available estimates, real GDP declined by about 1 percent, mainly because of a drop in agricultural production. Consumer prices rose by 24 percent on an annual average basis, compared with 3 percent in 1999, as a result of the contraction in agricultural food production and quick monetary expansion during the first half of 2000. However, during the second half of the year, the return of seasonal rains and the rise in imports of foodstuffs helped contain food prices. A tightening of monetary policy at year's end also contributed to lower inflation. As a result, the overall inflation rate at end-December 2000 fell to 14 percent. 4.  During the second half of 2000, the government implemented a series of measures in the areas of public finances and money and credit, geared at reducing domestic demand and curbing credit expansion. In particular, revenue-raising and expenditure-reducing measures contributed to a significant turnaround in the primary fiscal balance, from a deficit of 1.0 percent of GDP in 1999 to a surplus of 2.8 percent of GDP in 2000; the overall fiscal deficit (on a commitment basis, excluding grants) was halved, falling from 10.4 percent of GDP in 1999 to 5.3 percent of GDP in 2000. 5.  On the revenue side, the measures taken included: (i) strict control of tax and customs exemptions through the termination of spending ministries' power to grant such exemptions and the creation within the customs and tax directorates of units responsible for checking supporting documentation, the beneficiary, and the amount of each exemption granted; (ii) the attachment of financial assets of taxpayers in default and their prohibition from bidding for government contracts; and (iii) a sizable adjustment in the domestic prices of petroleum products, by 85 percent in the case of gasoline and 270 percent in that of kerosene. 6.  On the expenditure side, total expenditure and net lending was reduced by 3.3 percentage points from 28.7 percent of GDP in 1999. This reduction was achieved by, inter alia, (i) improving management of government contracts through competitive bids; (ii) strengthening the ex-ante expenditure control system; (iii) establishing quarterly expenditure ceilings; and (iv) invalidating expenditure commitments in cases of revenue shortfalls. Cuts were also made in military spending (0.8 percent of GDP), social services, and most other sectors. An increase in net external assistance to the equivalent of 4.4 percent of GDP, including an Emergency Economic Recovery Credit (EERC) disbursed by the World Bank, enabled the government to reduce substantially its net indebtedness to the banking system. 7.  In the monetary sector, developments were characterized by continued rapid expansion of credit to the private sector. While the money supply grew by only 5 percent, credit to the private sector increased by 46 percent, or the equivalent of 36 percent of the beginning-of-period money stock. The impact of this credit expansion was largely offset by the reduction of net bank credit to the government (from the equivalent of 18 percent of the beginning-of-period money stock) and a drawdown of international reserves. Credit expansion was fueled by the central bank's (Bank of the Republic of Burundi--BRB) policies of automatically granting unsecured loans to practically illiquid commercial banks and not enforcing rules on reserve requirements. In light of this situation, toward year's end, the BRB introduced an overall ceiling and individual quotas on bank refinancing and raised the refinancing rate from 12 percent to 14 percent. As a result, there was a marked slowdown in credit expansion with a corresponding slowdown in money supply growth. 8.  On the external side, because of strong private sector demand for imports and a deterioration of 14 percent in the terms of trade, the contraction of public sector expenditure did not lead to a corresponding improvement in the external position. The current account deficit (including official transfers) thus widened by 2.3 percentage points of GDP to 4.5 percent in 2000. However, owing to a marked improvement in the capital account in the form of program loans from the World Bank (mainly the EERC), the overall balance of payments deficit narrowed to 2 percent of GDP. This deficit was financed by a drawdown of international reserves (which fell from the equivalent of 5 months of imports in 1999 to 3 months in 2000) and an accumulation of US$24 million in external payments arrears, bringing the stock of external payments arrears to US$101 million (15 percent of GDP) at end-December 2000. These arrears are evenly divided between bilateral creditors (principally the Agence française de développement--AFD, for US$16 million) and multilateral ones such as the African Development Bank (AfDB) for US$14.2 and the Banque Arabe pour le développement économique en Afrique (BADEA) for US$14 million. Despite the increase in external assistance, the drawdown of international reserves and the injection of additional liquidity provided in the framework of the EERC in the auction market, the Burundi franc continued to depreciate, losing 24 percent of its value to the U.S. dollar over the 12-month period to end-December 2000. 9.  Budget execution during the first quarter of 2001 shows overruns under certain categories of expenditure because of exceptional factors, and in particular the payment in 2001 of an extra month's salary granted in 2000. However, the tax administration was more efficient, and certain categories of revenue exceeded the quarterly budget targets by more than 10 percent. This improvement in revenue collection, together with an increase in the treasury float, enabled the government to reduce its net indebtedness to the banking system by 0.7 percent of GDP. Inflationary pressures continued to abate, with an annual average change in the consumer price index of 14 percent at end-June 2001 compared with 26 percent a year earlier. III.  Economic Program for 2001 10.  The main objective of the government's economic program is to stabilize the macroeconomic framework so as to create the best conditions for the effective use of external assistance and lay the groundwork for sustainable growth and poverty reduction. To achieve this objective, the government will focus its efforts on (i) fiscal consolidation, through measures designed to improve revenue collection and streamline and reorient government spending; (ii) pursuing a restrictive monetary policy and flexible exchange rate policy; (iii) strengthening transparency and good governance with a view to improving the government's financial management and increasing the effectiveness of public expenditure; and (iv) the implementation of well-targeted structural reforms, in collaboration with the World Bank and other donors, with a view to improving the competitiveness of enterprises and making the national economy more attractive for investors. 11.  The 2001 economic program is based on the following assumptions: (i) real growth of more than 3 percent; (ii) an annual average inflation rate of 14 percent; and (iii) the stabilization of the international reserves at the equivalent of 3.2 months of imports. The program contemplates a marginal narrowing of the external current account deficit to 3.1 percent of GDP in 2001. Given the envisaged fiscal consolidation, public sector domestic savings is expected to increase by more than 2 percentage points of GDP. However, the ratio of domestic savings to GDP should decline by 1.1 percent of GDP because of robust private sector consumption. At about 2 percent of GDP in 2000, the ratio of private investment to GDP remains very low in part because of the security situation. A.  Fiscal Policy 12.  The government's fiscal policy for the remainder of 2001 is aimed at achieving an increase in the domestic primary balance of 1.3 percent of GDP compared with the 2000 outcome. Accordingly, despite the need to increase spending in the social sectors, the primary fiscal surplus is expected to reach 4.1 percent of GDP. This should enable the government to significantly curtail its recourse to domestic bank financing and help achieve the inflation rate target. The measures envisaged will be geared toward improving revenue performance and reining in current expenditure, while safeguarding social sector spending. 13.  Following the revenue-increasing measures implemented in the second half of last year (see paragraph 5 above), the government in May 2001 introduced excise duties on alcoholic and carbonated beverages, as well as new consumption taxes on a number of other products as a special contribution to the Solidarity Fund created to support the war and security efforts. Additional measures are planned for the second half of the year. These include, in particular, terminating customs exemptions and other tax exemptions and recording government expenditures inclusive of all taxes, so as to limit tax fraud. Moreover, based on the recommendations of the September 2000 technical assistance mission from the IMF's Fiscal Affairs Department, the government plans to rationalize the tax administration, paying special attention to: (i) the intensified collection of government revenue (including tax arrears); (ii) the strengthening of the financial and human resources of the Large Enterprises Division; and (iii) the introduction of a single identifier system to facilitate the identification of taxpayers. Together, these measures should yield additional revenue, equivalent to 1 percent of GDP in 2001. For the medium term, the government plans to introduce a value-added tax (VAT) and a system for auditing the fiscal accounts, including government revenue and military spending. 14.  On the expenditure side, the measures include realignment of spending priorities, with a view to reorienting available resources toward building administrative capacity and reducing poverty, with special attention paid to the social sectors. They also cover strengthening the effectiveness of expenditure management. Faced with pressing social demands, the government granted a 10 percent general wage increase, effective July 2001. Nevertheless, it will endeavor to partially offset its impact with savings on goods and services and on transfers and subsidies, while safeguarding social spending. The expected savings would amount to the equivalent of 0.7 percent of GDP, including accelerated collection of on-lent debt. 15.  The government will seek from donors the financing required for the resettlement and socioeconomic reintegration of refugees, displaced persons within the country, and the demobilization of soldiers. To this end, the government will formulate and implement a realistic demobilization program, after identifying resources to finance it. Post-conflict reconstruction needs will be assessed in cooperation with development partners. 16.  The government will review public expenditure priorities, with a view to meeting the basic social needs of the people. In this connection, the government will pursue social programs benefiting the most vulnerable segments of the population, especially in the areas of health, education, basic infrastructures, the fight against HIV/AIDS, and job creation. In addition, the government will continue working on the interim poverty reduction strategy paper (I-PRSP). In this context, a diagnosis of living conditions and poverty in Burundi has been carried out, and the impact of sectoral poverty reduction policies and programs has been assessed. With the assistance of the World Bank, consultations were conducted in the four regions of the country with a wide range of participants representing civil society, such as NGOs, denominational organizations, private sector representatives, labor leaders, and with local administrations, as well as with Burundi's development partners. A preliminary I-PRSP will be completed in September for further discussions with civil society and development partners, leading to the finalization and dissemination of the I-PRSP in November 2001. 17.  Based on the recommendations of the IMF's Fiscal Affairs Department technical assistance mission, measures have already been taken to improve the effectiveness of expenditure management. In this connection, the government will implement: (i) by end-September 2001, a system for the functional and economic classification of budgetary expenditure to facilitate budget analysis; (ii) by end-December 2001, a system for rigorously monitoring the flow of resources and government expenditure with respect to all external assistance programs, as well as a computerized management of expenditure from the commitment phase to actual payment by the government's cashier at the BRB (Caissier du Burundi-CAISBU); and (iii) by end-January 2002, a double-entry accounting system. 18.  On the basis of these budgetary projections and taking into account identified sources of financing, a budget financing gap representing 2.5 percent of GDP is projected for 2001. The government will approach Burundi's development partners to secure exceptional cash financing to fill this gap. B.  Monetary Policy 19.  Following the tightening of the refinancing policy in early October 2000, monetary policy in 2001 will be guided by the objective of further reducing inflationary pressures through restraining liquidity growth. To this end, the BRB will terminate altogether its policy of providing unlimited access to its refinancing by financial institutions. With IMF technical assistance, it will also develop a monetary programming framework and set up a money market to ensure that central bank resources are ultimately allocated by market forces. In addition, it will review the level of the refinancing rate with a view to making it consistent with developments with regard to interest rates on treasury notes. This policy stance is expected to lead to a reference interest rate positive in real terms during the program period. After developing the monetary programming framework, the BRB will shift toward greater use of indirect instruments in the conduct of monetary policy. 20.   As regards banking supervision, in early 2001 the government adopted and submitted to parliament a new banking law aimed at strengthening the supervision of financial institutions. While passage of this new law is expected by end-December 2001, the BRB will, in the interim, take the necessary steps to strictly enforce prudential rules and reserve requirements. In particular, it will increase the penalty rate for the maintenance of inadequate required reserves. C.  Structural Reforms 21.  Pending the design of a medium-term program of structural reforms in cooperation with the World Bank, the government intends to focus on (i) good governance and transparency in government finance management; (ii) public expenditure review (PER); and (iii) liberalization of the agricultural subsectors, in particular producer prices and marketing arrangements of coffee. 22.  As regards good governance, the government will seek to increase transparency in the management of both domestic and external public resources, in particular by (i) setting up a General Audit Office responsible for auditing government revenue and expenditure; (ii) pursuing procurement reform; and (iii) completing the PER exercise. With respect to procurement, the ongoing reform is expected to bring about an improvement in the efficiency of public expenditure, reduce the time required for project analysis, and improve the monitoring of project execution. 23.  The PER exercise is expected to contribute to an improvement in the allocation of public resources and efficiency gains in budget execution. Therefore, the government will continue the PER process recently initiated with World Bank support. The PER will cover the institutional aspects of expenditure management, the budget process, and budget preparation and execution. It will identify services and activities currently provided by the government that could be transferred to the private sector, the level and composition of public expenditure, and its impact on recipients and users. A review of public expenditure will also be carried out in the education and health sectors. The government will initiate the decentralization process and launch a study on the management of foreign assistance, with a view to preparing an action plan to facilitate the transition to budget consolidation and a medium-term budgetary framework. 24.  The government will pursue the liberalization and privatization of agricultural enterprises by withdrawing from productive and commercial activities, so as to create the conditions for competition and efficiency. It will amend the policy for setting producer prices to make it incentive oriented. D.  External Sector Policies and Financing Requirements 25.  The government's external sector policies will focus on (i) improving competitiveness so as to promote nontraditional exports; (ii) normalizing relations with external creditors; (iii) implementing a prudent borrowing policy and seeking concessional loans and grants; and (iv) pursuing the liberalization of trade arrangements. 26.  In July 2000, the BRB set up a foreign exchange auction market, which led to the unification of the two windows previously in operation under the exchange arrangements in Burundi. The new exchange arrangement consists of weekly auctions of foreign exchange to determine a single official rate for all transactions. All foreign exchange sold by the BRB is placed for auction. To strengthen Burundi's external position, the BRB will continue liberalizing the exchange system as foreign exchange becomes available. 27.  The authorities will ensure a smooth functioning of the exchange arrangement through reliance on a market-determined exchange rate to allow for a convergence between the official and parallel market rates. In this context, the BRB will not seek to influence the rate offered by the commercial banks and will limit its intervention on the exchange markets solely to achieving its international reserve target. 28.  Burundi's external position remains extremely weak because of the significant deterioration in the terms of trade for the third consecutive year (44 percent on a cumulative basis), against the backdrop of the increased demand for imports following the lifting of the embargo and the need to settle the external payments arrears accumulated to official multilateral creditors. At the same time, Burundi has to meet a heavy external debt-service burden (98 percent of its exports of goods and nonfactor services). Despite a slight improvement in the external current account, the overall balance of payments deficit is expected to reach 4.5 percent of GDP in 2001 because of a deterioration in the capital account. Burundi cannot currently meet all of its commitments and maintain an adequate level of international reserves without substantial financial assistance, notably through the establishment of a multipurpose donor trust fund. Donors agreed at the December 2000 Conference in Paris to set up such a fund under the leadership of the World Bank to centralize their assistance to (i) help Burundi clear its arrears with multilateral creditors and meet current maturities; (ii) support the demobilization, disarmament, and reintegration program; and (iii) promote human resource development. 29.  Given the modest international reserves target and an accumulation of arrears, the residual financing gap is expected to total US$28 million (4.1 percent of GDP). To cover this gap, the government will initiate consultations with its development partners, with a view to mobilizing part of the financial assistance pledged at the Paris Conference in December 2000. 30.  The government recognizes that there is room for trade liberalization. Consistent with its membership in the Common Market for Eastern and Southern Africa (COMESA), it will endeavor to bring, over the medium term, the tariff structure in line with that of the COMESA. E.  Technical Assistance Needs 31.  In view of the limited administrative capacity, timely provision of technical assistance in a number of areas will be critical to the success of the program. The Fiscal Affairs Department (FAD) has already sent two missions to Burundi in September 2000 to (i) formulate a tax and customs modernization strategy; and (ii) assess and finalize the new government accounting system and make suggestions for improving fiscal management. FAD has also recently agreed to provide: (i) a long-term expert to assist with, among other things, the preparation of a VAT; and (ii) a long-term expert to assist with budgetary management, with a view to improving budget presentation and classification, overhauling government accounting, and automating the expenditure process. A Statistics Department mission visited Bujumbura in September-October 2000 to provide assistance in the area of monetary and banking statistics. In addition, a Monetary and Exchange Affairs Department mission is planned for the near future to assess overall technical assistance need in the monetary and banking supervision areas. 32.  The government will take the necessary steps to ensure that key recommendations of technical assistance missions are quickly followed up. It will identify any further technical assistance needs, especially regarding measures that would have immediate positive impact on administrative capacity. The government will also prepare a general study on administrative and institutional capacity building needs. F.  Program Monitoring 33.  To ensure that the program objectives are achieved, the government intends to implement the actions indicated in Table 2 prior to the finalization of the relevant documentation of the government's request for a staff-monitored program. A number of structural performance indicators that are essential for supporting policies in other areas are also described in Table 2. 34.  The program will be monitored on the basis of quarterly quantitative indicators as specified in Table 1. The indicators established for end-September and end-December 2001 include floors or ceilings on (i) the primary fiscal balance (floor); (ii) the net bank credit to the central government (ceiling); (iii) the net domestic assets of the central bank (ceiling); (iv) the stock of the central government's external payment arrears (ceiling); (v) new nonconcessional external debt contracted or guaranteed by the central government or the BRB (ceiling); (vi) the outstanding stock of short-term external debt of the central government and the BRB with a maturity of less than one year; and (vii) changes in the net international reserves of the BRB (floor). The indicator on net credit to the central government will include an asymmetrical adjuster in the event of a shortfall in external financing. Two quarterly reviews are planned to assess progress with regard to the quantitative indicators for end-September and end-December 2001.   Table 1. Burundi: Quarterly Quantitative Indicators for the 2001 Staff-Monitored Program (In billions of Burundi francs, unless otherwise indicated)   2000 2001   Actual Mar. June   Sep. Dec.     Prel. est.   SMP 1. Floor on the primary fiscal balance (cumulative from beginning      of year)1 13.6 –2.5 1.7   8.4 23.5   2. Ceiling on net bank credit to the central government      (cumulative from beginning of year)2 31.2 27.4 36.3   34.1 32.0   3. Ceiling on net domestic assets of the central bank      (cumulative from beginning of year) 16.2 5.9 9.5   10.9 11.0   4. Ceiling on central government's outstanding external payments      arrears (in millions of U.S. dollars) 101.1 106.9 112.7   112.7 112.7   5. Ceiling on new nonconcessional external debt3 contracted or      guaranteed by the central government or the central bank     (cumulative from beginning of year; in millions of U.S. dollars)4 0.0 0.0 0.0   0.0 0.0   6. Ceiling on central government's outstanding stock of short-      term external debt3 with a maturity of less than one year      (cumulative from beginning of year)5 0.0 0.0 0.0   0.0 0.0   7. Floor on changes in the net foreign assets of the central bank      (cumulative from beginning of year; in millions of U.S. dollars) -5.3 10.9 9.5   8.2 9.0   Memorandum item:      Exceptional cash financial assistance (cumulative from      beginning of year) . . . . . . . . .   5.9 14.2 1Defined as the difference between government total revenue and expenditure, excluding all interest payments and investment financed by external resources. 2The ceiling or the floor will be adjusted downward (or upward) to accommodate positive (or negative) deviations between actual and projected disbursements of exceptional financial assistance (see paragraph 11 of TMU). 3As defined in the Annex to Attachment II. 4With a grant element of less than 35 percent. 5Excluding short-term import-related trade credits.   Table 2. Burundi: Structural Performance Indicators for 2001 Structural Measures Implementation Date Prior actions   1. Adoption of a Revised Budget Law consistent with the staff-monitored program   2. Introduction of special treasury checks to control exemptions on government imports and ensure their monitoring   3. Liberalization of access to the official exchange market through adoption and publication of central bank regulation authorizing access to the auctions marked by all licensed exchange bureaus   4. Preparation of a detailed public expenditure review program in collaboration with the World Bank   Structural benchmarks   1. Government finance   Systematically issue garnishment orders to improve revenue collection Throughout the program Launch campaign for the collection of property, water and forest revenues, and other administrative revenues October 2001 Set bimonthly ceiling on expenditure on the basis of available resources. Throughout the program 2. Money and banking supervision   Reassess the system of overall ceilings to improve the refinancing policy October 2001 Complete liberalization of the exchange system with a view to achieving convergence of the two official and parallel exchange rates December 2001 3. Governance   Establish a General Auditing Office responsible for auditing the government's resources and expenditures December 2001 4. Public enterprises   Establish a privatization program for public enterprises October 2001 Revise producer pricing policy and marketing arrangements in the agricultural subsectors Throughout the program 5. Social policy   Prepare an interim poverty reduction strategy paper (I-PRSP) and a timetable for the full PRSP November 2001 Burundi Technical Memorandum of Understanding 1.  The purpose of this technical memorandum of understanding (TMU) is to set out the terms and conditions for monitoring implementation of the program and the reporting requirements for the government of Burundi. It defines: (a) the quantitative indicators and structural performance indicators; (b) the adjusters for the quantitative indicators; and (c) the key assumptions used in formulating the economic program for 2001 set out in the memorandum of economic and financial policies (MEFP) of the government of Burundi attached to the letter of September 3, 2001 from the Minister of Finance to the Managing Director of the International Monetary Fund. 2.  Program monitoring will be based on an assessment of the observance of the quantitative and structural performance indicators at end-September and end-December 2001, in the context of two quarterly reviews. G.  Quantitative Indicators and Adjusters Quantitative indicators 3.  The program quantitative indicators, established on a cumulative basis from July 1, 2001 and set out in Table 1, Attachment I, are as follows: (a) a floor on the primary fiscal balance; (b) a ceiling on net bank credit to the central government; (c) a ceiling on net domestic assets of the central bank; (d) a ceiling on the central government's external payments arrears and a zero limit on the accumulation of new arrears (continuous quantitative indicator); (e) a ceiling on new nonconcessional external debt contracted or guaranteed by the government or the central bank (Bank of the Republic of Burundi--BRB) (continuous quantitative indicator); (f) a ceiling on the outstanding stock of short-term external debt of the central government and the BRB with a maturity of less than one year; and; (g) a floor on the net international reserves of the BRB. 4.  The program includes adjusters for the quantitative indicators, as specified in paragraph 11 and footnote 2 of Table 1, Attachment I. Definitions and computation 5.  Net bank credit to the central government is measured in accordance with the accounting practices of the BRB, following the IMF format. As of March 31, 2001, net bank credit to the central government totaled FBu 27.4 billion, broken down as follows: Net bank credit to the central government   In billions of FBu Bank of the Republic of Burundi (BRB), net 26.2   Credit to the central government 60.2     Treasury notes 27.2     Consolidated claims 29.3     Ordinary claims 0.3     Other claims 3.4   Deposits of the central government 34.0     Deposits of the government 1.0     Other deposits of the central government 33.0 Commercial banks, net 1.2   Claims on the central government 0.1   Deposits of the central government 0.4   CCP (postal checking system) 1.5 Net position of the government 27.4 6.  The external debt indicators are the ceilings on new nonconcessional external debt (as defined in the attached Annex) contracted or guaranteed by the central government or the BRB. Ceilings are also set for the outstanding stock of short-term external debt of the central government and the BRB with a maturity of one year or less. The quantitative indicator does not apply to rescheduling arrangements, drawings on the Fund, disbursement from the World Bank and the African Development Bank (AfDB), or normal import-related commercial credits. The concessionality of debts will be calculated on the basis of the commercial reference interest rates for the specific currencies used, as established by the Organization for Economic Cooperation and Development (OECD). A debt is deemed to be on concessional terms if, on the initial disbursement date, the ratio between the present value of the debt calculated on the basis of the commercial reference interest rates to the face value of the debt is less than 65 percent (namely, a grant element of at least 35 percent). 7.   The accumulation of external payments arrears (to which a continuous zero limit applies) is the difference between (a) the external debt service due (interest and principal, including moratory and/or penalty interest, if applicable) and (b) the amount actually paid, both during the period under consideration. 8.  The net change in domestic payments arrears of the government corresponds to the difference between (a) cumulative expenditure commitments (excluding external debt service) and (b) actual payments on committed expenditure (excluding external debt service), plus the difference between domestic debt service due subject to a moratorium (interest and principal, including moratory and/or penalty interest, if applicable) and the amount actually paid, both during the period under consideration. At end-March 2001, domestic payments arrears of the government amounted to FBu 7.6 billion; they are programmed to decline to FBu 4.5 billion at end-September 2001 and FBu 0.2 billion at end-December 2001. 9.   Total government revenue excluding grants is measured on a cash basis and includes offsetting operations between revenue and expenditure, including tax obligations of the private sector offset by financial obligations of the central government to the private sector. 10.   Total government expenditure is defined on a commitment basis and includes net lending. 11.  The primary fiscal balance is defined as the difference between (a) total government revenue, excluding grants and (b) total current expenditure (excluding interest payments) plus capital expenditure from domestic resources and net lending. The program contemplates an increase in the primary fiscal balance from 2.8 percent of GDP in 2000 (FBu 13.6 billion) to 4.1 percent of GDP in 2001 (FBu 23.5 billion). Adjusters 12.  The program also includes an asymmetric (downward/upward) adjuster for the quantitative indicators on net bank credit to the central government in the event nonproject external financing disbursements are higher or lower than program projections. In case of a deviation, a reduction or an increase in net bank credit to the central government is allowed. However, the upward adjustment is limited to 50 percent of the net shortfall (that is, the external financing shortfall plus any excess in the reduction of payments arrears) up to a cumulative maximum of FBu 6 billion. H.  Structural Performance Indicators 13.  The structural performance indicators are set out in Table 2, Attachment I. I.  Key Assumptions for the 2001 Program 14.  The main assumptions for the program are:   2001 Coffee (cents per pound) 68.0 Tea (U.S. dollars per kilogram) 2.3 Exchange rate (FBu per U.S. dollar; annual average) 850.0 J.  Reporting Requirements 15.  To facilitate program monitoring, the government of Burundi will prepare a quarterly report within five weeks following the end of the preceding quarter, which it will send to the Fund. In addition, the Permanent Secretariat for Monitoring the Economic and Social Reforms (SP/REFES) will, each month, send to the IMF's African Department the data required to monitor the program, by facsimile or e-mail. These data include (but are not limited to): (a) the monetary survey, the central bank balance sheet, and the consolidated balance sheet of the commercial banks; (b) the net financial position (NFP) of the government with the banking system; (c) the breakdown of government revenues; (d) the breakdown of total government expenditure, on a commitment basis; (e) the breakdown of domestic and external public debt service, on a contractual and actual payment basis, including a breakdown into interest and principal and by creditor, as well as any accumulation of domestic or external payments arrears; (f) the breakdown of the stock of domestic payments arrears (on a quarterly basis) and cumulative flows from July 1, 2001: the net accumulation of new arrears in 2001 as defined in paragraph 8 (on a cash basis, as shown in the "Reddition des comptes"); (g) the amount of new debt contracted or guaranteed by the government, with details on the terms (currency, interest rate, grace period, maturity); (h) actual disbursements of nonproject external financial assistance, including new borrowing and external debt relief granted by Burundi's external creditors; (i) indicators and other statistical data on overall economic developments, such as the household's consumer price index, merchandise imports and exports (volume and value) by major category, exchange rates; and (j) a status report on the implementation of the program's structural measures, as set out in Table 2, Attachment I. 16.  The Government of Burundi will also provide the IMF's African Department with any information the department deems necessary or which the IMF requests to ensure effective program monitoring.   Table 1. Burundi: Selected Economic and Financial Indicators, 1997–2001   1997 1998 1999 2000  2001   Est. Prog.1 SMP                 (Annual percentage change, unless otherwise indicated) National income and prices               GDP at current market prices (in billions of     Burundi francs) 337.3 393.1 402.5 489.0 582.4 572.3   Real GDP growth 0.4 4.8 –1.0 –0.9 5.0 3.2   Consumer prices (period average) 31.1 12.5 3.4 24.3 11.8 14.0   GDP deflator 23.3 11.2 3.4 22.5 11.7 13.4   External sector   Export, f.o.b (in U.S. dollars) 115.9 –26.8 –12.8 –11.9 –6.1 –2.6   Imports, f.o.b (in U.S. dollars) –3.9 28.5 –21.3 11.0 14.8 17.2   Export volume 89.7 –26.1 7.4 5.5 8.8 11.2   Import volume –3.2 37.5 –17.0 10.2 14.6 15.4   Terms of trade (deterioration -) 14.6 5.9 –14.4 –13.8 –13.7 –16.1   Exchange rate (in FBu per US$; average) 352.4 447.8 563.6 720.5 . . . . . .   Exchange rate (in FBu per US$; end of period) 408.4 505.2 628.6 778.2 . . . . . .   Real effective exchange rate (depreciation -) 23.9 –6.4 –14.8 9.6 . . . . . .   Central government   Revenue and grants 17.3 26.7 18.2 34.3 25.0 20.0   Revenue 9.9 46.8 8.0 33.4 28.0 21.5   Total expenditure and net lending (commitment basis) 0.1 24.0 24.3 7.8 42.9 18.3   Current expenditure 27.9 12.1 24.5 12.9 13.3 7.5               Money and credit               Net foreign assets2 –3.0 –22.7 4.1 0.8 –4.8 12.3   Domestic credit2 23.3 34.5 44.2 15.4 22.0 8.6     Government2 19.2 8.6 23.6 –18.3 5.6 0.8     Private sector2 2.0 22.8 22.9 36.3 15.9 8.3     Public enterprises2 0.9 2.1 1.1 –1.4 0.5 –0.3   Money and quasi money (M2) 10.4 0.0 45.5 4.3 17.3 17.0   Income velocity (ratio of GDP to M2; end     of period) 5.3 6.2 4.4 5.1 5.2 5.1   Deposit rate (12-month deposit) 9.3 9.6 10.6 12.1 . . . . . .   Lending rate (medium term) 15.8 17.6 18.0 20.1 . . . . . .         External sector (In percent of GDP, unless otherwise indicated)         Current account balance                 Excluding official transfers –5.1 –11.9 –10.3 –15.0 –21.4 –17.1     Including official transfers 0.3 –6.2 –2.2 –4.5 –5.7 –3.1   Debt-service ratio (scheduled)3 59.6 55.9 71.3 79.8 109.8 98.3               Central government               Revenue (excluding grants) 13.8 17.4 18.3 20.1 21.4 20.9   Total expenditure and net lending 22.2 23.6 28.7 25.4 29.3 25.7   Primary domestic balance –0.5 0.7 –1.0 2.8 2.3 4.1   Overall balance (commitment basis)             Excluding grants –8.4 –6.2 –10.4 –5.3 –7.9 –4.8     Including grants –5.4 –5.3 –7.5 –2.1 –5.0 –1.7               Gross investment 8.1 9.1 9.6 8.8 13.9 10.4   Public fixed investment 5.0 6.0 7.8 6.4 11.7 8.2   Private fixed investment 3.1 3.1 1.8 2.4 2.2 2.2 Gross national savings 8.3 2.9 7.4 4.3 8.2 7.3   Public –0.4 0.7 0.3 4.3 6.7 6.5   Private 8.7 2.2 7.1 – 0.0 1.5 0.8               External sector (In millions of U.S. dollars, unless otherwise indicated)   Current account             Excluding official transfers –48.5 –104.4 –73.3 –101.6 –155.6 –115.1     Including official transfers 2.4 –54.5 –15.8 –30.6 –41.6 –21.0   Overall balance of payments 7.0 –33.8 –27.2 –11.9 –37.8 –30.2   Stock of debt4 1,126.8 1,187.5 1,171.0 1,204.4 . . . . . .   Gross official reserves 117.3 70.5 49.2 39.4 45.0 43.9   Gross official reserves5 11.5 5.4 5.0 3.2 3.2 3.2   Net official reserves5 8.1 3.3 3.1 2.2 1.4 2.9   External payments arrears 53.7 72.8 76.7 101.1 117.5 112.7 Sources: Burundi authorities; and staff estimates and projections. 1Program agreed by the staff and the authorities in February 2001, but not presented to the Executive Board. 2In percent of beginning-of-period broad money supply. 3In percent of exports of goods and nonfactor services. 4Including arrears. 5End of period; in months of imports, c.i.f.   Table 2. Burundi: Central Government Financial Operations, 1997–2001   1997 1998 1999 2000  2001   Est. Budget Prog.1 SMP   (In billions of Burundi francs)                 Revenue and grants 56.8 71.9 85.1 114.2 123.6 141.3 137.1   Revenue 46.5 68.3 73.7 98.3 111.9 124.4 119.5     Tax revenue 43.9 62.3 70.0 93.7 101.0 110.4 105.5       Income tax 12.1 18.5 19.1 20.0 24.5 22.7 30.8       Taxes on goods and services 22.0 25.3 33.9 46.8 51.6 54.8 44.8       Taxes on international trade 8.9 18.3 17.0 22.8 21.9 28.3 27.0       Other tax revenue 0.9 0.2 0.0 3.9 3.0 4.6 2.6       Property tax 0.2 0.2 0.3 0.2 0.0 0.0 0.2     Nontax revenue 2.6 6.0 3.7 4.7 10.8 10.8 7.8     Revenue measures 0.0 0.0 0.0 0.0 0.0 3.2 6.2   Grants 10.3 3.7 11.4 15.9 11.7 16.9 17.6     Current budgetary grants 6.1 0.0 0.0 0.0 0.0 0.0 5.6     Project grants 4.2 3.7 11.4 15.9 11.7 16.9 12.0       Expenditure and net lending 74.9 92.8 115.4 124.3 171.6 170.7 147.1   Current expenditure 61.4 68.8 85.7 96.8 101.8 106.5 104.1       Salaries 24.1 27.2 30.0 33.9 36.4 36.4 40.3         Civilian 12.9 15.0 16.5 18.0 20.2 18.7 20.2         Military 11.2 12.2 13.5 15.9 20.2 17.7 20.2       Goods and services 18.3 25.1 34.8 37.9 35.6 43.5 37.0         Civilian 8.4 11.0 20.0 23.3 14.5 22.4 22.2         Military 9.9 14.1 14.8 14.6 14.8 16.2 14.8       Transfers and subsidies 5.7 7.1 8.1 9.9 12.2 12.2 11.9         Of which: international organizations 0.2 0.3 0.2 0.3 1.1 1.1 1.1                           households 0.9 1.1 1.7 1.7 2.1 2.1 2.1       Interest payments (due) 6.7 9.5 12.9 15.1 17.6 14.4 14.9         Domestic 2.8 3.3 6.0 6.9 6.3 6.3 6.3         Foreign 3.9 6.2 6.9 8.2 11.2 8.1 8.5       Exceptional expenditure 6.6 0.0 0.0 0.0 0.0 0.0 0.0         Extra-budgetary expenditure 0.0 0.0 0.0 0.0 0.0 0.0 0.0   Capital expenditure 16.9 23.5 31.3 31.1 72.2 68.2 47.0     Domestic resources 3.5 5.6 6.7 6.6 7.9 7.9 10.8       Of which: Defense 0.7 0.1 0.4 0.6 . . . . . . . . .     External resources 13.4 17.9 24.7 24.5 64.4 60.3 36.2       EERC expenditures2 0.0 0.0 0.0 2.2 0.0 15.3 15.3       Project lending 9.2 14.2 13.3 6.4 52.7 28.1 8.9       Capital grants 4.2 3.7 11.4 15.9 11.7 16.9 12.0   Net lending –3.4 0.5 –1.7 –3.6 –2.4 –4.0 –4.0     Receipts –3.4 –1.6 –1.9 –3.6   –4.0 –4.0     Onlending 0.0 2.1 0.2 0.0   0.0 0.0     Domestic primary balance3 –1.7 2.8 –4.1 13.6 22.2 13.2 23.5     Overall balance (commitment basis)     Including grants –18.1 –20.9 –30.3 –10.1 –48.1 –29.4 –10.0   Excluding grants –28.4 –24.5 –41.7 –26.0 –59.8 –46.3 –27.6                 Change in arrears (reduction –) 1.9 1.2 7.7 7.7 8.1 0.0 3.0   External Interest 1.4 2.1 3.4 5.0 . . . 0 2.8   Domestic 0.5 –0.9 4.2 2.7 . . . 0.0 0.2     Overall balance (cash basis) –16.1 –19.7 –22.6 –2.4 –40.0 –29.4 –7.0           Financing 15.6 20.6 20.7 1.2 48.1 4.4 –7.3   Foreign 5.3 13.2 5.7 21.5 31.6 –1.0 –7.7     Budgetary loans 0.0 0.0 0.0 22.3 1.3 3.6 7.9     Project loans 9.2 16.3 13.3 6.4 52.7 28.1 8.9     Amortization –7.9 –9.6 –18.0 –19.9 –30.5 –32.7 –32.7     Change in arrears (reduction –) 4.0 6.5 10.4 12.7 8.1 0.0 8.1   Domestic 10.2 7.4 15.1 –20.3 16.5 5.4 0.5     Banking sector 11.0 5.4 14.9 –16.8 6.6 5.4 0.8     Nonbank sector –0.8 2.0 0.1 –3.5 9.9 0.0 –0.3                 Errors and omissions/Financing gap 0.6 –1.0 1.9 1.2 –0.0 25.0 14.2             (In percent of GDP, unless otherwise indicated) Memorandum items:   Revenue 13.8 17.4 18.3 20.1 19.2 21.4 20.9   Total expenditure and net lending 22.2 23.6 28.7 25.4 29.5 29.3 25.7     Current expenditure 18.2 17.5 21.3 19.8 17.5 18.3 18.2     Capital expenditure 5.0 6.0 7.8 6.4 12.4 11.7 8.2   Military and security expenditure 6.3 6.7 7.0 6.2 5.8 5.8 6.1   Domestic primary balance3 –0.5 0.7 –1.0 2.8 3.8 2.3 4.1   Overall balance (commitment basis)         Including grants –5.4 –5.3 –7.5 –2.1 –8.3 –5.0 –1.7     Excluding grants –8.4 –6.2 –10.4 –5.3 –10.3 –7.9 –4.8   Overall balance (cash basis) –4.8 –5.0 –5.6 –0.5 –6.9 –5.0 –1.2     Domestic financing 3.0 1.9 3.7 –4.1 2.8 0.9 0.1     Foreign financing 1.6 3.4 1.4 4.4 5.4 –0.2 –1.4   Financing (net) 4.6 5.2 5.2 0.2 8.3 0.7 –1.3     External 1.6 3.4 1.4 4.4 5.4 –0.2 –1.4       Of which: external arrears 1.2 1.6 2.6 2.6 1.4 0.0 1.4      Domestic 3.0 1.9 3.7 –4.1 2.8 0.9 0.1       Of which: banking sector 3.3 1.4 3.7 –3.4 1.1 0.9 0.1   GDP at current market prices (in billions      of Burundi francs) 337.3 393.1 402.5 489.0 582.4 582.4 572.3 Sources: Burundi authorities; and Fund staff estimates and projections. 1Program agreed by the staff and the authorities in February 2001, but not presented to the Executive Board. 2Expenditures financed by the World Bank Emergency Economic Recovery Credit (EERC). 3Revenue minus expenditure (excluding interest and externally financed capital expenditure).   Table 3. Burundi: Quarterly Central Government Financial Operations, 1999–2001   1999 2000  2001     Est.  Mar. June   Sep. Dec.       Prel.   SMP   (In billions of Burundi francs)               Revenue and grants 85.4 114.2 31.9 61.5   91.1 137.1   Revenue 74.0 98.3 24.3 52.1 81.4 119.5     Tax revenue 70.4 93.7 21.8 48.5 73.9 105.5       Income tax 19.1 20.0 5.0 14.9 20.5 30.8       Taxes on goods and services 33.9 46.8 10.9 21.8 33.9 44.8       Taxes on international trade 17.0 22.8 5.1 10.9 17.9 27.0       Other tax revenue 0.0 3.9 0.6 0.7 1.4 2.6       Property tax 0.3 0.2 0.2 0.2 0.2 0.2     Nontax revenue 3.7 4.7 2.5 3.6 4.3 7.8     Revenue measures 0.0 0.0 0.0 0.0 3.1 6.2   Grants 11.4 15.9 7.6 9.4 9.7 17.6     Current grants 0.0 0.0 4.4 5.5 5.5 5.6     Capital grants 11.4 15.9 3.2 3.9 4.2 12.0               Expenditure and net lending 115.4 124.3 37.1 73.2 105.9 147.1   Current expenditure 85.7 96.8 29.3 55.8 80.8 104.1     Salaries 30.0 33.9 11.3 20.8 30.6 40.3       Civilian 16.5 18.0 6.1 10.4 15.3 20.2       Military 13.5 15.9 5.2 10.4 15.3 20.2     Goods and services 34.8 37.9 10.8 20.4 29.5 37.0       Civilian 20.0 23.3 4.9 12.3 17.7 22.2       Military 14.8 14.6 5.9 8.2 11.8 14.8     Transfers and subsidies 8.1 9.9 3.7 6.5 9.5 11.9       Of which: international organizations 0.2 0.3 0.3 0.5 0.8 1.1                          households 1.7 1.7 0.7 1.1 1.6 2.1     Interest payments 12.9 15.1 3.5 8.0 11.2 14.9       Domestic 6.0 6.9 2.1 3.8 5.2 6.3       Foreign 6.9 8.2 1.5 4.2 6.0 8.5   Capital expenditure 31.3 31.1 7.9 17.6 26.5 47.0     Domestic resources 6.7 6.6 1.2 2.9 4.8 10.8     External resources 24.7 24.5 6.7 14.8 21.7 36.2       EERC-financed expenditures 0.0 2.2 2.7 6.9 11.1 15.3       Project lending 13.3 6.4 0.8 4.0 6.5 8.9       Capital grants 11.4 15.9 3.2 3.9 4.2 12.0   Net lending –1.7 –3.6 –0.1 –0.2 –1.4 –4.0             Primary balance1 –3.8 13.6 –2.5 1.7 8.4 23.5               Overall balance (commitment basis)               Including grants –30.0 –10.1 –5.2 –11.7 –14.8 –10.0   Excluding grants –41.3 –26.0 –12.8 –21.1 –24.5 –27.6               Change in arrears (reduction –) 7.7 7.7 8.4 4.5 7.3 3.0   External 3.4 5.0 0.7 2.8 2.8 2.8   Domestic 4.2 2.7 7.6 1.7 4.5 0.2     Debt . . . . . . 0.2 0.2 0.2 0.2     Other (float) . . . 2.7 7.4 1.5 4.3 0.0             Overall balance (cash basis) –22.3 –2.4 3.1 –7.2 –7.5 –7.0               Financing 20.7 1.2 –3.1 7.2 1.6 –7.3   Foreign 5.7 21.5 0.9 2.2 –1.1 –7.7     Program loans 0.0 22.3 2.7 4.4 6.2 7.9     Project loans 13.3 6.4 0.8 4.0 6.5 8.9     Amortization –18.0 –19.9 –6.6 –14.4 –21.9 –32.7     Change in principal arrears 10.4 12.7 3.9 8.1 8.1 8.1   Domestic 15.1 –20.3 –4.0 4.9 2.6 0.5     Banking sector 14.9 –16.8 –3.9 5.1 2.9 0.8     Nonbank sector 0.1 –3.5 –0.1 –0.2 –0.3 –0.3       Amortization . . . . . . –0.1 –0.2 –0.3 –0.3       Change in arrears (reduction –) . . . . . . 0.0 0.0 0.0 0.0   Errors and Omissions / Financing gap 1.6 1.2 –0.0 0.0 5.9 14.2 Sources: Burundi authorities; and Fund staff estimates and projections. 1Revenue minus noninterest expenditure excluding foreign-financed development outlays.   Table 4. Burundi: Monetary Survey, 1997–2001 1997 Dec. 1998 Dec. 1999 Dec. 2000 Dec.  2001 Dec.           Prog.1 SMP   (In billions of Burundi francs)               Net foreign assets 34.7 20.4 23.0 23.7 19.1 35.6                 Central bank 33.7 22.0 19.4 20.5 15.8 31.8   Deposit money banks 1.0 –1.7 3.6 3.2 3.3 3.7               Net domestic assets 28.4 42.8 68.9 72.1 93.5 76.6                 Domestic credit 68.0 89.8 117.7 131.8 153.0 140.0                   Net claims on the government 23.3 29.5 41.9 23.9 29.4 24.6       Central government 27.7 33.1 48.1 31.2 36.7 32.0         Treasury 31.4 38.5 52.8 59.0 49.2 44.5         Other central government –3.7 –5.4 –4.8 –27.7 –12.4 –12.4            Of which: EERC2 0.0 0.0 0.0 21.0 5.8 5.7     Other government –4.4 –3.7 –6.2 –7.3 –7.3 –7.4       Government agencies –4.1 –3.4 –5.9 –6.8 –6.8 –7.2       Local government –0.3 –0.3 –0.2 –0.5 –0.5 –0.2                   Credit to the economy 44.7 60.3 75.8 107.8 123.6 115.4       Claims on public enterprises 2.3 3.6 4.5 3.2 3.7 2.9       Claims on private sector 42.4 56.8 71.2 104.6 119.9 112.5                 Other items, net (assets +) –39.6 –47.0 –48.8 –59.7 –59.5 –63.4               Money and quasi money 63.1 63.1 91.9 95.8 112.7 112.2                 Money 48.4 49.0 68.9 68.9 79.9 79.4     Currency in circulation 23.7 24.2 32.1 31.3 33.8 33.6     Demand deposits 24.7 24.8 36.8 37.6 46.1 45.8   Quasi money 14.7 14.2 22.9 26.9 32.8 32.7               (Annual change in percent of the beginning-of-period broad money supply)               Net foreign assets –3.0 –22.7 4.1 0.8 –4.8 12.3                 Central bank 3.6 –18.5 –4.2 1.2 –4.9 11.8   Deposit money banks –6.7 –4.2 8.3 –0.4 0.1 0.5               Net domestic assets 13.4 22.7 41.4 3.5 22.2 4.7               Domestic credit 23.3 34.5 44.2 15.4 22.0 8.6                 Net claims on the government 20.4 9.7 19.7 –19.6 5.6 0.6     Central government 19.2 8.6 23.6 –18.3 5.6 0.8                 Credit to the economy 2.9 24.8 24.5 34.9 16.4 7.9     Claims on public enterprises 0.9 2.1 1.1 –1.4 0.5 –0.3     Claims on private sector 2.0 22.8 22.9 36.3 15.9 8.3         Money and quasi money 10.4 0.0 45.5 4.3 17.3 17.0               Memorandum items:         Average stock of money (in billions of Burundi francs) 60.1 63.1 77.5 93.8 104.3 104.0   Currency/M2 ratio 0.4 0.4 0.3 0.3 0.3 0.3   M2/reserve money 2.3 2.2 2.5 2.6 2.4 2.6   Velocity (GDP/M2; period average) 5.6 6.2 5.2 5.2 5.6 5.5   Velocity (GDP/M2; end of period) 5.3 6.2 4.4 5.1 5.2 5.1   Change in credit to the economy (in percent) 3.9 35.1 3.1 42.3 14.6 7.1   Credit to the economy (as percent of GDP) 13.2 15.3 11.9 22.1 21.2 20.2   Disbursement of EERC (in millions of SDRs, cumulative) 0.0 0.0 0.0 22.6 0.0 0.0   GDP at current market prices (in billions of Burundi francs) 337.3 393.1 636.2 489.0 572.3 572.3 Sources: Banque de la République du Burundi; and Fund staff estimates and projections. 1Program agreed by the staff and the authorities in February 2001, but not presented to the Executive Board. 2Reflects balances in the counterpart funds account associated with the World Bank's emergency economic recovery credit (EERC), which is recorded under other liabilities in BRB's balance sheet.   Table 5. Burundi: Monetary Survey and Central Bank Accounts, 2000–01 (In billions of Burundi francs) 2000  2001     Mar. Jun. Sep. Dec.           SMP Monetary survey                 Net foreign assets 23.7 26.8 29.5 31.4 35.6                 Central bank 20.5 28.9 30.9 30.2 31.8     Deposit money banks 3.2 –2.1 –1.1 –2.1 3.7               Net domestic assets 72.1 72.0 82.4 83.1 76.6                 Domestic credit 131.8 130.7 143.0 142.8 140.0                   Net claims on the government 23.9 19.7 29.0 26.7 24.6         Central government 31.2 27.4 36.3 34.1 32.0            Treasury 59.0 60.7 69.4 52.1 44.5            Other central government –27.7 –33.4 –33.0 –18.0 –12.4              Of which: EERC2 21.0 21.8 20.1 19.0 5.7         Other government –7.3 –7.6 –7.4 –7.4 –7.4            Government agencies –6.8 –7.4 –7.2 –7.1 –7.2            Local government –0.5 –0.3 –0.2 –0.3 –0.2                   Credit to the economy 107.8 110.9 114.1 116.1 115.4         Claims on public enterprises 3.2 3.3 2.9 2.9 2.9         Claims on private sector 104.6 107.7 111.1 113.2 112.5           Of which: coffee                           Other items, net (assets +) –59.7 –58.7 –60.7 –62.0 –63.4               Money and quasi money 95.8 98.8 111.8 112.0 112.2                 Money 68.9 69.5 82.2 80.0 79.4       Currency in circulation 31.3 29.3 34.7 34.0 33.6       Demand deposits 37.6 40.2 47.5 46.0 45.8     Quasi money 26.9 29.3 29.6 32.0 32.7             Central Bank                         Net foreign assets 20.5 28.9 30.9 30.2 31.8     In millions of U.S. dollars 26.3 37.2 35.8 34.5 35.3       Foreign assets 30.6 38.2 39.3 39.2 39.5       Foreign liabilities 10.1 9.2 8.4 9.0 7.7               Net domestic assets 16.2 5.9 9.5 10.9 11.0     Domestic credit 56.1 41.3 54.7 55.1 54.2       Government (net) 28.0 24.2 33.6 26.6 17.4         Central government 30.2 26.2 35.7 28.8 19.6            Treasury 57.6 59.2 67.2 45.2 31.6              Claims 59.1 60.2 67.9 46.3 33.2              Deposits 1.5 1.0 0.7 1.1 1.5            Other central government –27.3 –33.0 –31.4 –16.4 –12.0         Other government agencies –1.9 –1.9 –2.1 –2.0 –1.9         Local governments –0.4 –0.1 –0.1 –0.2 –0.4       Nongovernment credit 28.1 17.1 21.1 28.5 36.8         Private sector 1.3 1.6 1.6 1.5 1.3         Public enterprises 0.0 0.0 0.0 0.0 0.0         Commercial banks 25.1 14.4 17.1 25.0 33.8         Nonbank financial institutions 1.7 1.1 2.3 2.0 1.7     Other items net (including revaluation) –39.9 –35.4 –45.2 –44.2 –43.2               Reserve money 36.7 34.9 40.4 41.1 42.8     Currency in circulation 31.3 29.3 34.7 34.0 33.6     Commercial bank reserves 3.6 4.5 5.1 7.1 9.2     Other nonbank deposits 1.8 1.1 0.6 0.0 0.0

Sources: Banque de la République du Burundi; and Fund staff estimates and projections. 1Program agreed by the staff and the authorities in February 2001, but not presented to the Executive Board. 2Reflects balances in the counterpart funds account associated with the World Bank's emergency economic recovery credit (EERC), which is recorded under other liabilities in BRB's balance sheet.

 

Table 6. Burundi: Balance of Payments, 1997–2001
	1997	1998	1999	2000	2001
				Est.	Prog.1	SMP
	(In million of U.S. Dollars)
Trade balance	–8.7	–59.5	–41.5	–58.8	–99.8	–78.7
Exports, f.o.b.	87.4	64.0	55.7	49.1	46.6	47.8
Of which: coffee	76.6	51.0	42.6	33.9	29.0	30.5
Imports, f.o.b.	–96.1	–123.5	–97.2	–107.9	–146.4	–126.5
Of which: petroleum products	–13.6	–18.5	–17.8	–20.8	–19.3	–20.0
Of which: imports related to reconstruction effort	0.0	0.0	0.0	0.0	–74.5	–57.0
Services (net)	–48.5	–51.0	–37.3	–47.4	–60.3	–44.0
Nonfactor services (net)	–36.0	–42.7	–26.0	–32.2	–45.3	–32.0
Factor services (net)	–12.5	–8.3	–11.3	–15.2	–15.0	–12.0
Of which: Of which: Of which: interest on public debt	–13.9	–9.7	–10.3	–11.4	–10.1	–9.9
Private transfers (net)	8.7	6.1	5.5	4.6	4.5	7.6
Current account (excluding official transfers)	–48.5	–104.4	–73.3	–101.6	–155.6	–115.1
Official transfers (net)	50.9	49.9	57.5	70.9	114.0	94.1
Current account (including official transfers)	2.4	–54.5	–15.8	–30.6	–41.6	–21.0
Capital account	4.6	20.8	–11.4	18.7	3.8	–9.2
Direct investment	0.0	0.0	0.0	5.0	5.0	6.0
Medium- and long-term official loans (net)	–7.9	15.0	–2.4	12.2	–1.2	–18.7
Disbursements	26.0	36.4	23.6	39.8	39.6	19.8
Program loans	0.0	0.0	0.0	30.9	4.5	9.3
Project loans	26.0	36.4	23.6	8.9	35.1	10.5
Amortization	–33.9	–21.4	–26.0	–27.6	–40.9	–38.4
Other capital	12.5	5.7	–9.0	1.5	0.0	3.5
Overall balance	7.0	–33.8	–27.2	–11.9	–37.8	–30.2
Financing (– increase in assets)	34.6	57.9	38.7	29.9	6.6	2.6
Change in central bank net foreign reserves (– increase)	19.1	38.8	14.3	5.3	6.6	–9.0
Change in central bank gross reserves	27.3	46.8	21.3	9.9	–5.7	–4.6
IMF (net)	–8.2	–8.0	–7.0	–4.5	12.3	–4.4
Change in arrears (+ increase)	15.5	19.1	24.5	24.5	0.0	11.6
Errors and omissions	–41.6	–24.2	–11.6	–18.0	0.0	0.0
Financing gap	0.0	0.0	0.0	0.0	31.2	27.6
	(In percent of GDP, unless otherwise indicated)
Memorandum items:
Nominal GDP (in U.S. dollars)	957.4	877.8	714.2	678.7	728.0	673.3
Trade balance	–0.9	–6.8	–5.8	–8.7	–13.7	–11.7
Current account (excluding official transfers)	–5.1	–11.9	–10.3	–15.0	–21.4	–17.1
Current account (including official transfers)	0.3	–6.2	–2.2	–4.5	–5.7	–3.1
Gross official reserves
In U.S. dollars	117.3	70.5	49.2	39.4	45.0	43.9
In months of imports, c.i.f.	11.5	5.4	5.0	3.2	3.2	3.2
Total external debt	120.6	137.5	165.7	178.5	180.0	179.4
Scheduled debt service (in percent of exports
of goods and nonfactor services)	59.6	55.9	71.3	79.8	109.8	98.3
Multilateral debt service due (in million of U.S. dollars)	33.7	36.4	34.0	33.3	34.0	33.3
Sources: Burundi authorities; and Fund staff estimates and projections. 1Program agreed by the staff and the authorities in February 2001, but not presented to the Executive Board.