Benon Herbert Olukant
4 February 2008
Burundi has adopted a three-pronged structural reform strategy for 2008 as the war-weary country seeks financial support from the International Monetary Fund.
The reforms are privatisation of public assets; encouraging direct investment and trade development; and opening the country's fledging economy to international trade.
Other planned reforms include increasing tax revenue to 19.1 per cent of gross domestic product; putting a cap on the government wage bill; and downsizing the army and police force in order to redirect budgetary spending towards the social sectors.
The government has decided on these measures to take advantage of its recent membership of the East African Community and more generally, its integration into the world economy.
However, of all the planned reforms, privatisation is the most significant.
In a memorandum of financial and economic policies for 2008 that accompanied a December 2007 letter of intent from the Burundi government to International Monetary Fund managing director Dominique Strauss-Kahn, the government says, "The privatisation process will be pursued transparently, with full respect for the rules of good governance."
The letter was jointly signed by the Minister for Finance, Economy and Development Co-operation, Clotilde Nizigama; Bank of Burundi Governor Gaspard Sindayigaya; and the country's Second Vice President Gabriel Ntisezerana.
"To facilitate the process," the letter adds, "the government will consolidate its various holdings when necessary."
The letter of intent from the government to the IMF management describes the policies the country intends to implement in the context of its request for financial support from the Fund. Burundi's latest letter of intent followed the request for the last instalment of a $110.3 million Poverty Reduction and Growth Facility loan from the IMF, which was approved on January 23, 2004.
Burundi's request for the final $11.4 million of the loan was approved on January 16. The Burundi government now says it intends to negotiate another loan under this arrangement. In the proposed privatisation programme, Burundi says one priority is the coffee sector - the country's biggest foreign exchange earner.
"Particular attention will be paid to reforming the coffee sector, because of its potential impact on growth and poverty. The intention is to provide for competition at all levels of the industry," says the memorandum.
The government also says that the sale of public enterprises to private investors is long overdue. It says the privatisation process should have started in November 2006 with the preparation of a privatisation strategy for the coffee washing stations and shelling mills, as well as a proposed new legal, regulatory and institutional framework for country.
But privatisation is not the only project facing delays. Since President Pierre Nkurunziza's government took power after winning the 2005 presidential elections, the country has generally faced significant problems in its attempts to implement programmes on time.
It failed to beat the June 2007 deadline to establish a unified data file for computerised payroll management at the Ministry of Finance., because of what it terms "significant delays in recruiting a consulting firm to conduct the work." The census of all government employees to be included on the data file was launched on December 10, 2007.
The establishment of a unified data file was one of the reforms that Bujumbura had promised to undertake when applying for the PRGF loan.
Another unfulfilled condition was the reduction of the external debt and efforts to qualify for debt relief under the enhanced Heavily Indebted Poor Countries (HIPC) initiative.
The failure to meet obligations has attracted the IMF's ire, with deputy managing director Murilo Portugal saying in a statement a fortnight ago that Burundi needed to step up its efforts to service its external debts and at least reduce its escalating payment arrears.
"Burundi is in debt distress," said Mr Portugal. "Progress toward the completion point under [HIPC] has been slower than envisaged. Efforts towards this end need to be accelerated, debt-service payment procedures improved and recourse to external borrowing on non-concessional terms be avoided."
Burundi's economic growth in 2007, by the government's own admission, also slowed from the 5.1 per cent of 2006, especially due to the drop in the country's coffee production from 30,000 metric tonnes in 2006 to only 7,000 metric tonnes by the end of September 2007.
The government says it intends to replace the transactions tax with a value added tax to fall in line with other EAC countries.
A new tax reform strategy is also expected to be in place by March.
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