Press Release No. 03/64

Press Release: IMF Approves US$13 Million in Post-Conflict Emergency Assistance for Burundi

May 5, 2003

The International Monetary Fund (IMF) today approved a second drawing of SDR 9.625 million (about US$13 million) in post-conflict emergency assistance for Burundi to support the government's reconstruction and economic recovery program in the aftermath of the August 2000 Peace and Reconciliation Agreement signed in Arusha, Tanzania. This program continues to address the immediate needs of security, humanitarian aid, and the rehabilitation of basic infrastructure, as well as to improve the macroeconomic environment. The credit is available immediately.

Following the Executive Board's discussion of the request by Burundi, Eduardo Aninat, Deputy Managing Director and Acting Chairman, stated:

"Burundi has been moving toward political normalcy since the conclusion of the Arusha Peace and Reconciliation Agreement in August 2000, and the authorities have begun addressing the country's deep-seated economic problems. Significant progress was made in implementing the economic program in 2002 and early 2003. Economic growth was sustained and inflation has remained under control. Despite poor weather early in 2003, economic activity is expected to continue to recover with the gradual restoration of peaceful conditions and the return of business confidence. However, foreign exchange earnings have been adversely affected by the currently low world price of coffee.

"The government's program for 2003 appropriately calls for monetary restraint to contain inflationary pressures and preserve an appropriate level of external reserves. Fiscal policy aims to maintain the cautious fiscal stance achieved in 2002, while meeting priority spending in line with the government's national reconciliation and poverty reduction priorities. A number of key foreign exchange market reforms have been implemented, including steps to improve the functioning of the auction system, which have helped reduce the differential between the official and parallel market exchange rates. However, further progress in liberalizing the exchange system is needed in order to unify the exchange rates.

"The authorities have indicated that they intend to seek further Fund support under the Poverty Reduction and Growth Facility (PRGF) as early as conditions permit. Adoption of a PRGF-supported program could pave the way for debt relief from external creditors, including relief under the enhanced Initiative for Heavily Indebted Poor Countries. The Fund stands ready to consider further financial support for Burundi in the coming months, subject to continued strong program implementation, progress in regularizing relations with external creditors, and further advances in the peace process," Mr. Aninat said.