Rwanda Burundi

COUNTRY REPORT

Rwanda Burundi

August 2001

The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through our digital portfolio, where our latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group.

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Contents

3 Summary

Rwanda

5 Political structure 6 Economic structure 6 Annual indicators 7 Quarterly indicators 8 Outlook for 2001-02 9 Economic policy outlook 10 Economic forecast 11 The political scene 16 Economic policy and the economy 18 Agriculture 19 Mining 20 Foreign trade and payments

Burundi

22 Political structure 23 Economic structure 23 Annual indicators 24 Quarterly indicators 25 Outlook for 2001-02 26 Economic policy outlook 27 Economic forecast 28 The political scene 33 Economic policy and the economy 34 Agriculture 35 Foreign trade and payments

List of tables

10 Rwanda: forecast summary 27 Burundi: forecast summary

List of figures

7 Rwanda: exchange rate 7 Rwanda: foreign reserves 12 Rwanda: areas of recent fighting 19 Rwanda: international tantalum prices 24 Burundi: exchange rate 24 Burundi: foreign reserves 32 Burundi: areas of recent conflict 34 Burundi: claims on central government 34 Burundi: exchange rate

EIU Country Report August 2001 © The Economist Intelligence Unit Limited 2001

Summary

August 2001

Rwanda

Outlook for 2001-02 Incursions into Rwanda from Congo by the interahamwe and ex-FAR rebels are set to continue. However, they appear to pose little real threat to the Rwandan Patriotic Front (RPF) government as it has easily contained these attacks militarily and the loyalty of the rural Hutu populations has not seriously wavered. The rebels’ lack of success with attacks on the north-west may cause them to retreat to Burundi and launch attacks on southern Rwanda from there. The government has reaffirmed that it intends to maintain the ban on political activity. However, further agitation against this is set to increase, and the government may have to do more to neutralise such pressures. Greater co- operation with international peace efforts by the new Congolese government has served to increase pressure on and scrutiny about Rwanda’s own involvement there. This has also exposed the growing political weakness of Rwanda’s proxy force, the RCD. The government’s main economic policy objectives are to promote rapid, poverty-reducing growth as well as increased delivery of social services. Revenue generation remains a key objective, although spending will rise due to a higher than expected donor disbursement. Real GDP growth is expected to reach 5% in both 2001 and 2002.

The political scene The interahamwe Hutu rebels have launched the first attacks on north-west Rwanda in two and a half years, an action believed to be motivated by growing pressure in eastern Democratic Republic of Congo, including a decision by its government that they should leave the country. A former president, Pasteur Bizimungu, has attempted to defy the ban on party politics and establish a new party, a move swiftly quashed by the government. Allegation of a growing incidence of human rights abuses has led to former government members and supporters fleeing the country. Efforts are underway to repair relations between Rwanda and Uganda following meetings between the two presidents in July. Cross border “defections” between the two countries have continued over the past quarter. Overtures are underway between Rwanda and Zimbabwe aimed at reaching agreement in Congo.

Economic policy and the The poverty reduction strategy paper is being finalised, an event which will economy meet a condition for receiving debt relief under the heavily indebted poor countries (HIPC) initiative. The privatisation programme is experiencing considerable delays including for the main state utilities and coffee and tea factories. The government is nonetheless pushing ahead and the delays are primarily technical ones. The Ministry of Finance is acting to clear domestic arrears. The “B” season harvest has been positive with production rising from last year.

Foreign trade and Rwanda has ratified the African Union treaty which has come into being, payments replacing the former Organisation for African Unity.

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Burundi

Outlook for 2001-02 Following a summit on the peace process in Arusha, Tanzania, in July, there is a good chance that a transitional government, headed by President Pierre Buyoya, may be installed by November 2001. The transition and the peace agreement face stiff resistance from the armed forces and some opposition parties but is supported by the two largest Hutu and Tutsi parties as well as regional states. However, the anti-agreement opposition parties will be well placed to exploit growing anxiety among Tutsis regarding the transition, which will include a Hutu president in 18 months’ time and elections in three years. Military reform will remain a contentious issue as Hutus insist that this is necessary while the largely Tutsi armed forces adamantly oppose it. The conflict is set to escalate. The main rebel group, the Forces pour la défence de la démocratie (FDD), is withdrawing from the Democratic Republic of Congo, under pressure from the government there, and returning its forces to Burundi. The government will draw satisfaction from the support it has received for the transition from regional states and the international community. Real GDP growth has been revised downward to 2.8% this year on account of delays in restarting large scale foreign aid, but may pick up in 2002 as such assistance is consolidated.

The political scene The mediator, Nelson Mandela, has secured agreement to the implementation of the Arusha peace accord following acceptance of a compromise that President Buyoya remain president during the first 18 months of the transition. A Hutu president, from the Front pour la démocratie au Burundi (Frodebu), is to take over during the second half of the transition. This compromise has been accepted by regional heads of state and many, but not all, of the opposition parties. A coup attempt by “anti-agreement” members of the armed forces took place July 22nd, the second this year, but was quickly quashed. The rebels have continued to reject any cease-fire amid a continued escalation of fighting inside the country. An influential report has alleged that the rebels’ non-participation in the peace process is largely due to the incompetence of the Tanzanian mediation team.

Economic policy and the The government has announced a new war tax on some consumer goods to economy support public expenditure. A 10% wage rise for civil servants has been announced. The government has continued borrowing from the central bank to fund public expenditure, replacing an earlier policy of borrowing from the domestic commercial banks. The currency, the Burundian franc, has continued to weaken. The “B” season harvest has risen this year.

Foreign trade and Donors have still not disbursed the bulk of funds pledged at a conference in payments Paris last year, because of continued doubts over the conflict. The EU has urged swifter implementation of these pledges. Burundi has ratified the African Union treaty which has replaced the Organisation for African Unity.

Editors: Douglas Mason (editor); Angus Downie (consulting editor) Editorial closing date: July 26th 2001 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule

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Rwanda

Political structure

Official name République Rwandaise

Form of state Unitary republic

Legal system Based on Belgian law, the June 1991 constitution and the Arusha accords of August 1993

National legislature Assemblée nationale, with 74 members, appointed by the government in consultation with party leaders

National elections December 1988 (presidential and legislative); next elections 2003. Local elections March 2001.

Head of state The president, currently Paul Kagame

National government Self-appointed in July 1994; consists of ministers from the RPF, MDR, PSD, PL, PDI and PCD; last reshuffle March 2001

Main political parties Rwandan Patriotic Front (RPF); Mouvement démocratique républicain (MDR); Rassemblement pour le retour des réfugiés et la démocratie au Rwanda (RDR); Forces de résistance pour la démocratie (FRD); Parti centriste démocrate (PCD); Parti libéral (PL); Parti social démocrate (PSD); Parti démocratique islamique (PDI)

President Paul Kagame (RPF) Prime minister Bernard Makusa (MDR)

Key ministers Agriculture, animal resources & forestry Ephraim Kabaija (RPF) Commerce, industry & tourism Alexandre Ryambabaje (MDR) Defence Emmanuel Habyarimana Education Emmanuel Mudidi (RPF) Energy, water & natural resources Marcel Bahunde Finance & economic planning Donald Kaberuka (RPF) Foreign affairs & regional co-operation André Bumaya (PDI) Gender & the promotion of women Angeline Muganza (RPF) Health Ezéchias Rwabuhihi (RPF) Interior & community development Jean de Dieu Ntiruhungwa (PSD) Justice Jean de Dieu Mucyo (independent) Land, resettlement & environment Laurent Nkusi (PL) Local government Désiré Nyandwi (PSD) President’s office Joseph Mutaboba (RPF) Public works & transport Silas Kanamugire (PSD) Public service & labour Sylvie Zaïnabo Kayitesi (independent) Social affairs Charles Ntakirutinka (PSD) Youth, culture & sports François Ngarambe (RPF)

Central bank governor François Mutemberezi

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Economic structure

Annual indicators

1996 1997 1998 1999 2000a GDP at market prices (Rwfr bn) 431.1 562.5 631.7 641.0 712.2 Real GDP growth (%) 15.8 12.8 9.5 6.1 5.2 Consumer price inflation (av; %) 9.0 7.4 4.0 –2.4 6.5 Population (m) 6.2 7.7 7.9 8.1b 8.3 Exports fob (US$ m) 61.7 93.2 64.5 62.3 68.4 Imports fob (US$ m) 218.5 278.2 234.0 202.8 226.0 Current-account balance (US$ m) –8.5 –62.2 –24.2 –2.5 –8.0 Reserves excl gold (year-end; US$ m) 106.7 153.3 168.8 174.2 190.6 Total external debt (year-end; US$ m) 1,043 1,111 1,226 1,300 n/a External debt–service ratio, paid (%) 19.8 13.3 30.8b 48.2 n/a Green coffee productionc (‘000 tonnes) 15.3 14.8 14.3 18.8 17.7 Exchange rate (av; Rwfr:US$) 306.8 302.4 317.0 333.9 389.7

July 20th 2001 Rwfr434.4:US$1

Origins of gross domestic product 2000 % of total Components of gross domestic product 1999 % of total Agriculture 40.3 Private consumption 85.9 Industry 20.1 Public consumption 9.6 Services 38.7 Gross fixed capital formation 18.0 Others (incl import taxes) 0.9 Exports of goods & services 6.2 Imports of goods & services -19.7

Principal exports 1999 US$ m Principal imports cif 1999d US$ m Coffee 26.5 Capital goods 44.8 Tea 17.5 Intermediate goods 42.0 Cassiterite (tin ore) 1.2 Energy products 33.1 Hides 0.5 Food 28.0 Pyrethrum 0.3 Other consumption goods 107.2

Main destinations of exports 2000e % of total Main origins of imports 2000e % of total Germany 17.7 Kenya 22.1 Pakistan 7.4 Belgium 9.0 Netherlands 6.7 US 7.5 Belgium 5.6 Japan 3.5 US 5.1 Germany 3.1 a Estimates based on IMF, World Bank and national data. b EIU estimates. c Crop years starting April 1st. d Data on imports broken down by category is inconsistent with the most recent aggregate total. e Based on partners’ trade returns; subject to a wide margin of error.

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Quarterly indicators

1999 2000 2001 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr Prices Consumer prices (1995=100) 123.2 124.8 126.3 126.6 127.6 131.9 134.2 135.2 % change year on year –5.6 –1.3 1.9 1.6 3.6 5.7 6.3 6.8 Financial indicators Exchange rate Rwfr:US$ (av) 337.2 332.9 337.9 357.2 374.6 402.8 424.2 433.5 Rwfr:US$ (end-period) 337.7 334.7 349.5 366.1 388.5 411.7 430.5 434.0 Interest rates Deposit rate (av; %) 8.07 8.03 7.97 8.01 8.46 9.25 10.02 10.02 Discount rate (av; %) 11.13 10.81 11.19 11.19 11.19 11.25 11.69 10.94 M1 (end-period; Rwfr bn) 57.64 58.32 59.17 57.85 58.17 55.21 63.11 54.51 % change year on year 9.0 20.1 7.0 11.9 0.9 –5.3 6.7 –5.8 M2 (end-period; Rwfr bn) 94.54 98.92 98.71 97.08 101.94 100.00 114.13 110.98 % change year on year 14.2 16.2 7.9 4.3 7.8 1.1 15.6 14.3 Foreign trade (Rwfr m) Exports fob 7,496 5,914 3,814 3,165 7,296 5,913 4,147 4,293 Imports cif –20,634 –21,238 –21,195 –23,089 –20,578 –18,741 –20,644 n/a Trade balance –13,138 –15,324 –17,381 –19,924 –13,282 –12,828 –16,497 n/a Foreign reserves (end-period; US$ m) Reserves excl gold 171.1 156.7 174.2 159.3 134.7 144.9 190.6 214.8 Source: IMF, International Financial Statistics.

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Outlook for 2001-02

Political outlook

Domestic politics Further incursions into Rwanda by forces of the former Rwandan army (ex- FAR) and interahamwe militia from the Democratic Republic of Congo (Congo) are expected over the forecast period. However, this is more an indication of weakness than strength on the part of the rebels as the attacks appear to be motivated by their precarious position in Congo, the government of which apparently wishes them to leave. More importantly, the loyalty of the Hutu populations in the north-west has not come into question during the insurgency, in a further indication that the authority of the ruling Rwandan Patriotic Front (RPF) is not seriously under threat, at least from the rebels. Although the rebels retain some of their military supply lines, including those with the Mai-Mai militia in eastern Congo, the Rwandan Patriotic Army (RPA) has commanding advantages. This includes superior logistical and strategic capacity, and high motivation among a professional and battle-hardened army operating on its own turf.

To some extent the incursions are probably the outcome the RPA desires as it has long believed that annihilation is the ultimate solution to the rump force of the former perpetrators of the 1994 genocide; the RPA has consistently expressed deep scepticism that the international community and the other signatories to the Lusaka peace accord will ever prove capable of disarming the rebels as the agreement requires.

A significant side-effect of the incursions has been the suspension of the tourism sector, which is based on gorilla viewing in the Virunga mountains, the scene of the current stand-off. Given lack of success in the current incursions and pressure inside Congo, one option is for the Rwandan rebels to head for Burundi where their allies, the Burundian Forces pour la défense de la démocratie (FDD) rebels, are also returning from Congo. Unlike in Rwanda, the Burundian rebels have a firm base inside the country and are clearly enjoying some military momentum against the government there. More Rwandan rebels are already reported by the Burundian army to have started crossing into the country in early July. However, relations between Burundian and Rwandan rebels are volatile, and they have been known to turn on each other in the past. A key stronghold for both groups is now Burundi’s Kibira forest which straddles the border with Rwanda where it is called the Nyungwe forest. Rebel attacks from the Nyungwe forest would be directed at communes in Cyangugu and Gikongoro in southern Rwanda.

The swiftness with which the authorities quashed the attempt of the former president, Pasteur Bizimungu, to establish a new party, the Parti Démocratique pour le Renouveau (PDR), will have discouraged others looking to challenge the government's ban on new parties and party politics in this way. As the general election in 2003 nears and politicians outside the ruling RPF begin to scent the possibility of change, pressure will mount for the ban to go. The probable first venue for the call will be the transitional national assembly.

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However, the government wants to delay lifting the ban for as long as possible and those who speak up on the issue may find themselves ejected from the assembly for “suddenly” discovered corruption or genocide charges—the means by which the government usually punishes dissent.

International relations One outcome of the Congolese government having adopted a more co- operative stance on the peace process is that it has put Rwanda on the defensive in regard to its activities and interests in that country. Rwanda thus wishes to curtail the growing international stature of Congo’s president, Joseph Kabila, which has accompanied wiser counsel by his government. This has made it more difficult for Rwanda to insist that he should not be accorded more authority than other factions contesting for power in Congo. That includes Rwanda’s own proxy, the Rassemblement congolais pour la démocratie (RCD), whose weak political credentials may be further exposed as the convening of the national dialogue conference, the first preparatory meeting of which is planned for August, begins to move forward. Although Mr Kabila is pressing the Rwandan and Burundian rebels to leave Congo, he has been explicit in his support for the Mai-Mai militia in eastern Congo on the basis that they are a legitimate Congolese group, although under the Lusaka peace agreement they are termed one of the “negative forces” which are meant to be disarmed.

The RPA has intensified its conflict against the Mai-Mai, particularly in South Kivu, and this seems set to continue over the next year. With increased violence in South Kivu and UN troops now being deployed in Uvira and Bukavu, the Mai-Mai’s status is set to come to the fore in the international diplomacy that surrounds the Lusaka peace process, and this is more likely with the support of France. Rwanda will resist any attempt to change the Mai- Mai’s status.

Despite periodic rapprochement, relations between Rwanda and Uganda are unstable, and this has been underlined by defections from each other’s armies. It is not impossible that the defectors could be used by either government as the nucleus of an armed dissident force. For the moment relations between Rwanda and Uganda are calming down, making this unlikely in the short term. The two governments are also finding greater convergence of interests in Congo; resource competition, previously the main source of conflict, has declined now that their spheres of influence in the country are more clearly defined, and they are looking ahead to the Congolese peace process where a shared interest is the disarmament of hostile rebel movements.

Economic policy outlook

The government's main economic objective is poverty reduction. It is seeking to promote this through rapid, labour-intensive growth, macroeconomic stability, a quantitative and qualitative increase in service delivery, and improved rural infrastructure and incomes. A poverty reduction strategy paper (PRSP), which defines poverty reduction policy and how resources saved from debt service are used, is expected to be completed before the end of 2001.

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Increased revenue generation is a key policy goal. The 2001 budget includes a 23% increase in revenue, and there are signs that this could be exceeded, although government forecasts on VAT collection appear optimistic. The government aims to reduce the overall fiscal deficit while increasing capital and poverty-related expenditure; it may be able to meet its increased spending targets, which had previously appeared over-ambitious, owing to the receipt of unanticipated donor funds. Donors, particularly the IMF and the World Bank, are pushing for greater scrutiny of off-budget—and unrecorded—expenditure. Formally, the government is addressing this through stricter expenditure controls under the cash budgeting system and by strengthening the position of the auditor-general. Little progress can be expected on reducing unrecorded military expenditure, particularly since the RPA has developed autonomous sources of revenue, particularly from artisanal mining in Congo. Government efforts to increase service delivery in the key social sectors will be constrained by extremely weak institutional capacity. The government’s medium-term expenditure framework (MTEF), launched last year, could improve efficiency in the allocation of resources to the social sectors throughout the outlook period.

Economic forecast

Economic growth The Economist Intelligence Unit expects real GDP growth of 5% in both 2001 and 2002. This is the slowest rate since 1994 further indicating that the period of rapid catch-up growth following the end of the war has come to an end. Nonetheless, it is relatively robust by the standards of most African countries, particularly given a lack of natural resources and adverse international conditions. Growth is being driven in 2001 by the agricultural sector, where overall output is expected to be up by at least 4% from the year before. Otherwise, the services sector is expected to continue its strong contribution to overall economic performance. Inflation will be kept under control at 5.5%, although this is slightly higher than earlier forecast because of currency weakness.

Rwanda: forecast summary (US$ m unless otherwise indicated) 2000a 2001b 2002b Real GDP growth (av; %) 5.2 5.0 5.0 Consumer price inflation (av; %) 6.5 5.5 5.5 Merchandise exports fob 68.4 61.0 59.0 Merchandise imports fob 226.0 248.0 253.0 Exchange rate (av; Rwfr:US$) 389.7 430.0 455.0 Coffee (arabica; US cents/lb) 87.1 66.0 57.0 Tea (US$/kg) 1.9 1.7 1.6 Oil (Brent; US$/barrel) 28.5 26.8 25.5

a EIU estimates. b EIU forecasts.

External sector Export earnings will be poor in 2001 because of year-on-year falls in both coffee production and international prices, which are forecast to decline by 32% in 2001 and 16% in 2002. Falling prices are also expected in the tea

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sector, although this will be compensated for by rising production, resulting in a slight increase in tea earnings. Overall, however, we forecast that exports will fall to US$61m in 2001 and to US$59m in 2002. International aid inflows will continue their steady decline from the highs of the mid-1990s when donor support covered most of Rwanda’s emergency and post-conflict reconstruction needs. This is an indication of the country’s normalisation as it comes to fund a greater portion of its development needs from own resources; nonetheless, international assistance still remains high by any measure. The exchange rate of the Rwandan franc against the US dollar will depreciate gradually, but at a faster rate than the inflation differentials between the two countries. Foreign reserves—which have continued to rise during 2001, to over ten months of import cover in May—will remain at a robust level.

The political scene

Hutu rebels stage first large Since May members of the former Rwandan army (ex-FAR) and the attacks in over two years interahamwe militia responsible for the 1994 genocide, a group which officially proclaims itself under the little-recognised title, Peuples en armes pour la libération du Rwanda (Palir), have launched sporadic raids on western Rwanda from bases in Democratic Republic of Congo (Congo). These have been the first significant attacks by the rebels on Rwandan soil since December 1998 (1st quarter 1999, page 14). Most of the recent attacks have taken place in the north-western prefectures of Gisenyi and Ruhengeri bordering Congo, which were the heartland of the former Rwandan regime. The Rwandan Patriotic Army (RPA) says the groups are attacking Rwanda because they have been forced from their positions in the Kivu provinces in Congo by the RPA and its ally, the Rassemblement congolais pour la démocratie (RCD), and because their allies in Congo are encouraging them to go home (see below). The RPA states that it has not suffered any casualties but claims to have killed over 1,000 infiltrators since May and to have captured hundreds more. There has been no independent confirmation of these figures. Army commanders say that most captives are child soldiers who are to be returned to their families in Rwanda after a period of “re-education”.

The RPA captures a rebel On July 15th the RPA announced the capture of one of the ex-FAR’s two chiefs- chief-of-staff of-staff, Paul Habimana, also known by the nom de guerre, Colonel Bemera, during a counter-insurgency operation in the Virunga mountains in Ruhengeri prefecture. Mr Habimana, whose chief of intelligence was captured the week before, stated that he had crossed the border into Rwanda to see how his troops were faring, admitting that they were under severe pressure there and in South Kivu. Mr Habimana had apparently been caught following a tip-off from a villager. According to the RPA, during the current insurgency the allegiance of local people has been almost entirely with the government. Certainly the RPA has not so far had to devote much effort to warning the local population to disassociate themselves from rebel forces or face the consequences, as happened during the incursions of 1996 and 1997. There have also been no reports of RPA massacres of villagers for non-co-operation. One reason for the

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change in sentiment may be a greater popular sense of ownership of government in the region following local elections in March (May 2001, page 11). Another is certainly that the north-west has enjoyed relative peace for nearly three years despite the war just across the border, and most residents do not wish to risk this on behalf of the rebels.

The MDR leadership crisis The leadership of the troubled coalition partner, the Mouvement démocratique continues républicain (MDR) party, is still in doubt, with powerful party members rejecting the authority of its interim president, Célestin Kabanda. Some MDR members attempted to remove Mr Kabanda from the post in February, although this was blocked by the Rwandan government (May 2001, page 12). In early June, the minister of local government, Désiré Nyandwi, gave the MDR three months to sort out its leadership squabbles, but did not specify the sanctions he would wield if it failed to do so. The MDR ruled Rwanda at independence and retains a strong Hutu support base, particularly in Gitarama in the south west. It joined the Rwandan Patriotic Front (RPF) dominated

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transitional government in 1994, after jettisoning its previous ideology of Hutu supremacism, but has found that the ongoing ban on party political activity has stymied its tentative efforts to develop a new political platform.

Ex-president Bizimungu In late May, the former president and RPF member, Pasteur Bizimungu, who tries to launch a new party resigned from office in disputed circumstances in March 2000 (May 2000, page 10), attempted to defy the government ban on party politics and establish a new party, the Parti Démocratique pour le Renouveau (PDR). The government immediately ruled the party illegal and placed Mr Bizimungu under house arrest for one day. Mr Bizimungu appealed to the president, Paul Kagame, in mid-June to lift the ban on political activity, but to little effect. At the end of the month Rwanda's transitional national assembly passed a motion confirming the illegality of the briefly formed PDR, and stripping Mr Bizimungu of his privileges as ex-head of state. The Rwandan Alliance for the Renaissance of the Nation (ARENA), a recently formed US-based opposition alliance which is attracting support from the steadily growing number of Rwandan political exiles, condemned the banning as an example of the government's dictatorial tendencies.

Mandate of UN human The UN Commission on Human Rights (UNCHR) voted by 28 votes to 16 rights representative ended (with nine abstentions) in late April to end the mandate of the special representative on human rights in Rwanda. Justifying their vote, many representatives said they believed Rwanda had made major improvements in human rights in recent years, although the Belgian representative dissented, saying a continued UNCHR presence was still needed. International human rights organisations have criticised the UNCHR decision as inappropriate, and allege that illegal arrests, disappearances, and extra-judicial executions are on the rise in Rwanda.

Worrisome trends apparent According to the Rwanda-based, Ligue des droits de la personne dans la région in sphere of human rights des Grands lacs (LDGL), a new trend is emerging. Rwandans formerly exiled in Uganda and who returned after the RPF victory in 1994—the so-called “Ugandan elite” who dominate power in Rwanda—are for the first time being targeted for arrest or elimination. This has followed the flight of several senior RPA officers to Uganda in recent months, where there are plausible reports that they have been secretly welcomed by the Ugandan People's Defence Force (UPDF). In early May the New York-based Human Rights Watch (HRW) asked the government to investigate several disappearances, particularly that of the former minister of the interior, Théobard Rwaka Gakwaya, of the Parti centriste démocrate (PCD), who was sacked in March (May 2001, page 11), and went missing in late April. The government has subsequently alleged that Mr Gakwaya has fled to Paris via Uganda. The government usually explains the disappearance or defection of fallen members of the elite by pointing to allegedly troubled personal circumstances of the person in question, or saying that they are facing investigation for corruption or genocide. Undeniably, however, it appears that the inner circle that wields true power in Rwanda is shrinking steadily, and senior RPF figures now finding themselves edged out are choosing to flee.

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At the end of May a Kenyan judge overturned the conviction of three men for the murder of former Rwandan interior minister, Seth Sendashonga, in Nairobi in May 1998 (3rd quarter 1998, pages 31-32). The judge ruled that the Kenyan police had failed to prove its case against them, and instead accused the Rwandan government of being behind the killing. The Rwandan government has denied any involvement in Mr Sendashonga’s murder.

Human rights abuses In mid-June, HRW released a study of the government’s villagisation alleged in villagisation programme entitled Uprooting the Rural Poor in Rwanda. According to the report, 14% of the population now live in new villages, which it says are often worse than the ones they were intended to improve upon. The report alleges that tens of thousands of rural Rwandans have had their rights violated by the villagisation process, which has been characterised by intimidation and coercion. The RPF has maintained that the Rwandan tradition of scattered rural settlements and no large towns is a cause of the country’s low economic development, arguing that villagisation can reverse this. Because of donor antipathy towards villagisation schemes, the government secured donor funds by presenting the policy as a response to the post-genocide housing crisis. The government dismissed the HRW report as an attempt to undermine national unity, and urged the international community to reject it. While conceding that mistakes had been made in implementing villagisation, it denied it had used coercion. What seems clear from the HRW report is that however much popular ownership of the villagisation process may be emphasised at the policy-making level, the Rwandan state remains an authoritarian structure. For reasons embedded in Rwandan history, from pre-colonial periods to the present, directives received from on high are invariably implemented in a rigid manner regardless of how local communities may feel about them or how disruptive their impact is.

Belgian court in landmark In an historic judgment on June 8th, a jury in Belgium found four Rwandans, genocide judgment including two Roman Catholic nuns—Consolata Mukangango and Julienne Mukabutera, known as sisters Gertrude and Kisito—guilty of war crimes committed during the 1994 genocide, handing down sentences from 12 to 20 years' imprisonment. The case against the four was brought by relatives of victims of the genocide under a 1996 law according Belgian courts an international jurisdiction in trying human rights cases. The case marks the law's first successful prosecution, and has been hailed by human rights workers and legal experts as a major advance for international human rights law. Three of the four found guilty are appealing against the verdict, but the fourth, former university professor, Vincent Ntezimana, has accepted it. The Rwandan government welcomed the verdict and urged other states harbouring genocide suspects to follow Belgium's example. The Vatican, however, declined to accept the verdict, expressing "surprise at seeing the grave responsibility of so many people and groups...heaped upon so few people”. Throughout proceedings the judge was insistent that the four accused were not on trial for genocide, but for specific war crimes. The judge had also been forced to intervene to block an attempt by the Benedictine order to which the two nuns belong, to ban other nuns from testifying against them. Having unmistakably allied itself to the cause of the nuns' innocence, the Belgian verdict is a blow for the Catholic

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Church. More controversy involving the Church is anticipated following Italy’s refusal in mid-July to hand over a Catholic priest to the International Criminal Tribunal for Rwanda (ICTR). The ICTR chief prosecutor, Carla del Ponte, described the decision as "a scandal".

ICTR delivers its first not On June 6th the ICTR made its first acquittal in a genocide trial in the case of guilty verdict Ignace Bagilishema, against whom the judges stated the prosecution had failed to state its case. Mr Bagilishema was mayor of Mabanza in Kibuye during the genocide, and had been accused of being involved in the killing of 45,000 people there. Mr Bagilishema's French lawyer, François Roux, considered the judgement good for reconciliation in Rwanda. The government said it would accept the verdict, although the minister of justice, Jean de Dieu Mucyo, said he was shocked, since Mr Bagilishema was a notorious génocidaire. Ms del Ponte has appealed. Although technically a free man, Mr Bagilishema has not been released because the ICTR requires two referees to guarantee his attendance at the appeal proceedings, and none have yet come forward. The ICTR has completed no other cases in the past quarter, and has once again been accused of tardiness, this time by the influential Brussels-based think-tank, the International Crisis Group (ICG). The ICTR, which has implemented several procedural changes recently to speed up proceedings, rejected the ICG’s criticisms as unfair. In mid-July there were fresh arrests of senior genocide suspects to be handed over to the ICTR, including Rwanda’s former finance minister, Emmanuel Ndabahizi, who was arrested in Belgium.

Diplomatic relations being President Kagame and the Ugandan president, Yoweri Museveni, met twice in repaired with Uganda July, following an escalation in tensions between their two countries during the Ugandan election campaign, when Mr Museveni described Rwanda as a "hostile nation" (May 2001, page 14-15). The July meetings were officially described as cordial. While neither government appears fully reassured about each other’s intentions in the region, both seem committed to trying to repair relations. One pressing reason for doing so is the move east of Congo-based Rwandan rebel forces, which prompted a decision in mid-June to resume joint operations between the UPDF and RPA on the Rwanda-Uganda border.

Cross-border defections, however, have continued to be an irritant to relations between the two countries. In late June around 50 UPDF officers defected to Rwanda, claiming they had been tortured in Uganda. Rwanda is treating them as refugees, but has banned them from speaking to the press or any form of political activity. The Rwandan government has told the Economist Intelligence Unit that it expects the same conditions to be observed in regard to RPA dissidents living in Kampala.

The war escalates in On July 10th President Kagame and the Congolese president, Joseph Kabila, the Kivus met at the Organisation of African Unity summit in Lusaka, Zambia. The UN Secretary General, Kofi Annan, reported that the two presidents had agreed not to issue any provocative statements about each other. However, a few days later Mr Kabila accused Rwanda of wanting to create a secessionist state in east Congo. Not to be outdone, on July 18th Mr Kagame accused Mr Kabila of still supporting the ex-FAR and interahamwe in the Kivus. Increasing attention is

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being paid to Rwanda’s commercial interests in Congo, particularly since the publication of a UN report on the exploitation of Congo’s natural resources by belligerents (May 2001, page 14). However, the Rwandan government insists that its main concern in Congo is combating Rwandan rebel forces, who are thought to number approximately 15,000. The pro-Rwandan RCD claims that the Congolese government and its allies are still air-dropping supplies to Rwandan and Burundian rebel forces within its territory as well as transporting rebel units behind its own lines. This is denied by the Congolese government, which says it wants the Rwandan and Burundian militia to go home, and admits only to assisting the Mai-Mai—a Congolese militia committed to expelling Ugandan, Rwandan and Burundian forces from Congo. The RPA and RCD launched a new drive against the Mai-Mai in the Ruzizi plains of South Kivu in June, and claimed later to have destroyed several of their bases there.

The interahamwe rebels are With the disengagement of belligerent forces signatory to the Lusaka accord losing allies now underway, the UN mission in Congo (MONUC) has turned to the issue of the non-signatory belligerents, or “negative forces”. These include the Rwandan and Burundian rebels which, under the Lusaka accord, are meant to be identified, disarmed, and repatriated by signatories. In mid-June, the UN Security Council approved revised operations for MONUC which include creation of a new unit to supervise the disarmament and demobilisation of these armed forces. An accompanying Security Council resolution demanded that all forms of assistance to these armed forces be terminated. This has apparently motivated Mr Kabila and his allies to encourage Rwandan and Burundian rebels to move to areas controlled by their opponents, the RCD, the Forces for the liberation of Congo (FLC) and the Rwandan and Ugandan armies. This is the main reason for the escalation of the war in the Kivus, and for the recent attacks on Rwanda (see above). Assistance to Rwandan and Burundian rebels has not been terminated, although it may have lessened or become more discreet. This is apparently one of the factors that has made possible the recent tentative efforts at rapprochement between Rwanda, Namibia and Zimbabwe. Mr Kagame travelled to Harare on May 7th for talks with Zimbabwean president, Robert Mugabe, and later claimed agreement with him on key issues in Congo, including how to deal with the ex-FAR and the interahamwe. In late June the Namibian president, Sam Nujoma, sent a message to Mr Kagame aimed at improving relations between the two countries, which was warmly received in Rwanda, particularly since Namibia's troops are set to withdraw completely from Congo.

Economic policy and the economy

Poverty reduction strategy The government is moving to complete its poverty reduction strategy paper to be finalised (PRSP), the document that establishes an integrated framework for how all government actions and policies contribute to the overall goal of poverty reduction. An interim PRSP was drafted last year (November 2000, page 16) completing a condition for Rwanda to reach “decision point” for access to the World Bank and IMF’s heavily indebted poor countries (HIPC) debt relief

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initiative by December 2000. The next stage in the process, which would enable Rwanda to advance towards HIPC completion point, is to finalise the PRSP and begin implementation. Formation of the PRSP is supposed to be a participatory process and the government has been implementing what it calls the Participatory Poverty Assessment (PPA). The process, begun in June, has involved training people in participatory approaches and techniques at national, provincial and district level to carry out poverty assessments in their areas. The assessments are now complete, and the data from them is expected to be forwarded shortly. The national poverty reduction programme (NPRP) includes detailed gender-disaggregated poverty profiles, problem identification and ranking in each community, and data on Rwandans’ assessments of the services currently available to them. As well as being used for the PRSP by all relevant line ministries in conjunction with the NPRP, data from the PPA will be used by the Ministry of Land, resettlement and environment in the development of Rwanda’s national land policy. Meanwhile, the Ministry of Finance is undertaking a costing exercise to determine how much the government could spend on its priority programmes.

Slow progress on Rwanda’s 2001 budget forecasts an ambitious schedule for completing the privatisation privatisation of a number of important parastatal companies this year, including at least four tea factories, the Masaka coffee factory, the Rwandex import/export company, and the state telecommunications company, Rwandatel. The electricity, water and gas utility, Electrogaz, will also be put under private management (February 2001, page 17). However, several of the sales have been hit by delays. Progress has stalled at Rwandatel because the government has not yet settled on a merchant bank to advise on and facilitate the sale. The Rwanda Privatisation Secretariat now hopes the sale could be concluded by June 2002 at the earliest. Six international companies have expressed interest in managing Electrogaz, although they are waiting for the finalisation of the management contract, which is due to be completed by August. The companies will then submit final proposals, with a winning con- tractor to be selected in December. Meanwhile, Electrogaz is being restructured; the new director, Sam Nkusi, brought in from Rwandatel in March, has dismissed roughly 1,000 staff for alleged incompetence and corruption including some managers who have been arrested. Electrogaz has been unable to keep up with the growing demand for electricity in Kigali in recent years, caused by a rapid increase in population. The sale of 51% of Rwandex has been delayed because of a dispute about the company’s value. Auditors gave a book value for the company of Rwafr900m (US$2m), but state shareholders com- plained that this was too low and demanded a full asset audit, which is still awaited. There are also delays in the sale of the Mulindi and Pfunda tea estates, where bids were supposed to have already been invited, as the government is in dispute with the consultants for the sale, the Adam Smith Institute of the UK, over the institute’s fee. Talks are currently under way and the privatisation institute says it hopes a new agreement can be in place by August.

Local government is Implementation of the Medium Term Expenditure Framework (MTEF) is trained in MTEF proceeding. The MTEF was originally introduced in April 2000 and aims to change the way line ministries plan and budget their resources, while

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increasing transparency in state expenditure and making it easier for donors to co-ordinate their resources with government policies (May 2000, page 19). After a slow start, the process is under way and full implementation is due by 2003. The finance ministry, unconvinced that other ministries have fully grasped the MTEF (November 2000, page 17), has implemented training within the ministries and authorities at provincial and district level. The finance ministry is particularly concerned to make sure local government officials understand the MTEF since, under the ongoing decentralisation policy, more responsibilities and financial resources are being transferred to local government during the next two or three years. Each ministry and province is supposed to submit draft budgets prepared under the MTEF by the end of July. Decentralisation is, however, generating opposition and obstruction within the national ministries, since they are reluctant to cede power and financial resources to other structures. Decentralisation is popular at provincial level as government officials await their increased budgets.

Donor funds to increase A revised budget for 2001 is due to be debated by Rwanda’s transitional budget expenditure parliament soon. It adds a provisional Rwafr14.5bn (US$30.4m) in government expenditure to the Rwafr156.4bn envisaged in the January budget (February 2001, page 16). This is because an additional Rwafr9bn was obtained from donors in December 2000 that had not been integrated into the budget. Rwafr7.9bn of this windfall has been allocated to the settlement of domestic arrears and debt, with most of the remainder to be used for additional recurrent expenditure in priority and social areas. These include demobilisation of soldiers, a prisoner feeding programme, medical supplies, seed and fertiliser, and Kigali’s sanitation systems. A further Rwafr200m has also been added to the wage bill, in anticipation of salary payments for new recruits, particularly in the VAT department of the Rwanda Revenue Authority. The revised budget has new domestic revenue projections which are up on the original budget figure, and now stand at Rwafr83.9bn, compared with Rwafr82.4bn in January. The new figures assume, optimistically, that VAT collection will continue to improve and that parastatals will pay their taxes in full.

Domestic arrears are being A recent analysis of Rwanda’s domestic arrears by the ministry of finance audited indicates domestic arrears claims worth Rwafr27bn, some of which date to before 1994. So far Rwafr2.3bn of these have been verified as legitimate, and the finance ministry proposes that Rwafr1.7bn be settled in cash by the end of the year. The Auditor General is looking into the rest, and is expected to verify arrears of Rwafr5bn more in the course of 2001. These are probably to be paid by issuing medium-term Treasury bills.

Agriculture

Good rains in May boost Because of generally good rains, particularly in May, output from Rwanda’s 2001 "B" season output 2001 "B" season, which runs from February to July, appears to have been higher than in 2000, according to preliminary assessments. Food prices are falling in Rwanda as produce from the 2001 "B" season becomes available. According to the US Agency for International Development’s Famine Early Warning System

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(FEWS), the rains have allowed the bulk of the sorghum crop to ripen, and sweet potatoes, cassava and bananas to develop, but have caused some spoilage in the bean harvest. The FEWS noted that food security had greatly improved in previously vulnerable provinces such as Kigali Rurale, Kibungo and Umutara. However, acute malnutrition has increased in Kigali Rurale’s drought- prone Bugesera region, because residents who left the area in search of food elsewhere have been returning destitute. FEWS also reported that there has been no population displacement during the current insurgency in the north- west, unlike on previous occasions, and consequently no noticeable falls in food production. An outbreak of foot-and-mouth disease which began in Umutara in February appears to be over, and no new cases were reported in May. This has enabled the ban on the movement and sale of livestock to be eased, to the relief of pastoralists there.

Mining

Tantalum is a lucrative The international price of tantalum, of which Rwanda is a substantial exporter, resource for Rwanda has declined steadily this year from a peak of roughly US$370/lb in January to a current figure of around US$125/lb, despite the fact that demand continues to outstrip supply. Tantalum is used in passive capacitors, a key component of mobile phones, and analysts attribute the fall in the price to maturing growth in the world wide mobile telephone market. Africa’s Great Lakes region is now a substantial producer of tantalum, mainly in the form of colombo-tantalite (coltan), and some mining analysts claim that it has become the world’s most important source. A UN report on resource exploitation in the Democratic Republic of Congo has drawn attention to coltan mining in the Kivus (May 2001, page 18) the control of which has been an important resource for all the warring factions there. Rwanda’s armed forces, the Rwandan Patriotic Army (RPA) and its Congolese proxy, the Rassemblement congolais pour la democratie (RCD) control the main mines, although their opponents, the Mai- Mai and interahamwe militias also have lucrative coltan producing areas under their control. Rwanda is a conduit for the export of coltan from Congo although it is also a producer itself and high international prices have drawn increasing numbers of prospectors to mine for the mineral, often artisanally.

Meanwhile, the UN report has led to pressure on international companies who buy their tantalum from Rwanda to stop doing so. The campaign is being spearheaded by the Tantalum-Niobium International Study Centre (TIC), a Belgium-based non-profit trade association consisting of producers, processors, and consumers. The US-based Electronic Components, Assemblies and Materials Association has supported the TIC's appeals, and has called on US manufacturers to only buy from legal sources. However, many within the industry have questioned the effectiveness of this given the often circuitous nature of the tantalum supply chain, particularly from the Great Lakes. The troubled Belgian airline Sabena, meanwhile, announced in June that it would no longer carry coltan exports from Kigali, but this does not trouble Rwandan coltan traders who say there are plenty of other airlines from which to choose.

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Foreign trade and payments

Rwanda joins in creation of Rwanda has ratified the new African Union (AU) treaty which has replaced the the African Union former Organisation of African Unity (OAU). The president, Paul Kagame, attended the 37th annual OAU heads of state assembly in Lusaka, Zambia, on July 2nd-11th, where the Zambian president, Frederick Chiluba, took over the chairmanship of the organisation from President Gnassingbé Eyadéma of Togo. The assembly formally implemented the Constitutive Act of the African Union (AU), following Nigeria’s ratification of the Act on April 26th, allowing the Act to enter into force 30 days after the deposit of the instruments of ratification. The formation of the AU had been agreed at the 36th annual assembly of the OAU, held in Togo in July 2000, with the AU to replace the OAU following ratification by two-thirds of member states. The OAU secretary-general, Salim Ahmed Salim, has said that there will be a transitional period of approximately one year to allow the AU to become fully operational. Amara Essy, Côte d’Ivoire’s foreign minister for most of the 1990s, will replace Mr Salim in September, having been elected interim secretary-general, but he is mandated to serve only until May 2002.

Organisation of African Unity/African Union

Realisation of the AU will lead eventually to the creation of:

• a pan-African parliament;

• a Union Court of Justice;

• an African central bank;

• an African monetary fund; and

• an African investment bank.

In addition to closer economic ties, common defence, foreign and communications policies will also be established, based loosely on those of the EU. However, the AU’s founding statements stopped short of removing the OAU principle of non-interference, which has been a major hindrance in the resolution of conflicts on the continent. As is the case with certain member states in the EU, some African states are wary of losing their sovereignty to a super-state. The OAU was criticised as being ineffectual—little real action resulted from its policy decisions—and for years it was hampered by severe budgetary difficulties. These problems are likely to continue under the AU, and (change of name notwithstanding) it is unclear how the AU assemblies will be any more effective than those of the OAU.

Donors pledge fresh funds The US Agency for International Development (USAID) announced in July that for social projects it has signed three co-operation agreements with the Rwandan government worth US$11m in the current fiscal year. The money is to expand existing programmes concerning good governance, health and social sector assistance,

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and agricultural development. The Belgian and Netherlands governments in May and June donated US$2m and US$300,000 respectively to the Rwandan justice system, most of which is for gacaca (traditional justice) courts. In April, the World Bank agreed a loan with the Rwandan government worth around US$40m to develop Rwanda’s private business sector. The money is intended to improve the investment climate, in part by examining possible legal reform in this area and the creation of a commercial court, and to reduce private sector costs by improving the efficiency of public utilities. Funds are also intended to speed the privatisation of the tea industry.

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Burundi

Political structure

Official name République du Burundi

Form of state Unitary republic

Legal system Based on Belgian law and the transitional constitution approved in June 1998

National legislature Assemblée nationale, with 121 members, 81 of whom were elected in 1993 and the rest appointed in 1998

National elections June 1993 (presidential and legislative); the date is not yet set for the next elections

Head of state President, currently Pierre Buyoya

National government Appointed by Mr Buyoya in June 1998. Consists of Uprona and Frodebu (internal wing).

Main political parties Front pour la démocratie au Burundi (Frodebu); Union pour le progrès national (Uprona, formerly the sole legal party); Parti du peuple (PP); Rassemblement pour la démocratie et le développement économique et social (Raddes); Rassemblement du peuple burundais (RPB); Parti pour le redressement national (Parena); Conseil national pour la défense de la démocratie (CNDD)

President Pierre Buyoya First vice-president Frédéric Bamvuginyumvira Second vice-president Mathias Sinamenye

Key ministers Agriculture Salvator Ntihabose Civil service & labour Emmanuel Tungamwese Commerce, industry & tourism Joseph Ntanyotora Communal development Denis Nshimirimana Defence Cyrille Ndayirukiye Development & reconstruction Léon Nimbona Education Prosper Mpawenayo Energy & mines Bernard Barandereka Finance Charles Nihangaza Foreign affairs & co-operation Séverin Ntahomvukiye Health Stanislas Ntahomvukiye Human rights & institutional reform Eugène Nindorera Information & government spokesman Luc Rukingama Interior & public security Colonel Ascension Twagiramungu Justice Térence Sinunguruza Land & environment Jean-Pacifique Nsengiyumva Peace process Ambroise Niyumbasa Public works & housing Gaspard Ntirampeba Resettlement of refugees & displaced persons Pascal Nkurunziza Transport & telecommunications Colonel Epitace Bayaganakandi Women, welfare & social affairs Romaine Ndorimana Youth, sports & culture Gérard Nyamwiza

Central bank governor Grégoire Banyiyezako

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Economic structure

Annual indicators

1996 1997 1998 1999a 2000a GDP at market prices (Bufr bn) 272.6 337.3 425.1b 460.2 582.0 Real GDP growth (%) –8.4 0.4 4.5b –1.0 1.8 Consumer price inflation (av; %) 26.4 31.0 12.5b 26.0 22.0 Populationc (m) 6.09 6.20 6.31 6.42 6.53 Exports fobd (US$ m) 40.1 87.3 64.0 56.4 32.2 Imports fobd (US$ m) 100.0 96.1 123.5 93.5 110.0 Current-account balance (US$ m) –40.3 –1.7 –59.6 –21.2 –62.0 Reserves excl gold (year-end; US$ m) 139.6 113.0 65.5 47.9 32.9 Total external debt (year-end; US$ m) 1,127 1,066 1,119 1,123e n/a External debt-service ratio, paid (%) 53.5 29.0 61.2 62.9 n/a Green coffee productionf (‘000 tonnes) 14.5 31.8 16.5 29.9 17.6 Exchange rate (av; Bufr:US$) 302.8 352.4 447.8 563.6 720.7

July 20th 2001 Bufr844.9:US$1

Origins of gross domestic product 1998 % of total Components of gross domestic product 1999 % of total Agriculture 45.6 Private consumption 86.2 Industry 16.7 Public consumption 16.2 Manufacturing 12.8 Gross domestic investment 6.9 Services 37.7 Exports of goods & services 9.2 GDP at factor cost 100.0 Imports of goods & services –18.5 GDP at market prices 100.0

Principal exports fob 1999 US$ m Principal imports cif 1999h US$ m Coffee 44.1 Intermediate goods 50.2 Tea 10.3 Capital goods 30.0 Manufactures 1.0 Consumption goods 37.4 Hides 0.1 Food 10.0

Main destinations of exports 2000g % of total Main origins of imports 2000g % of total UK 38.3 France 24.9 Switzerland 22.1 Zambia 15.6 Germany 16.0 Kenya 14.4 US 13.2 Tanzania 12.0 Netherlands 12.8 South Africa 11.5 a EIU estimates. b Estimate based on IMF, World Bank or national data. c Mid-year estimates. d Balance-of-payments basis. e Actual. f Crop years (April-March) starting in year stated. g Based on partners’ trade returns; subject to a wide margin of error. h Data on imports broken down by category is inconsistent with the most recent aggregate total.

Quarterly indicators

1999 2000 2001 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr Prices Consumer prices (1995=100) 187.2 194.4 209.2 231.8 236.4 242.1 248.4 n/a % change year on year –1.9 6.7 14.2 28.5 26.3 24.5 18.7 n/a Financial indicators Exchange rate Bufr:US$ (av) 540.5 577.4 617.5 639.0 661.9 772.7 809.1 764.3 Bufr:US$ (end-period) 548.3 608.4 628.6 650.9 653.4 800.0 778.2 777.8 Interest rates (%) Discount (end-period) 12.00 12.00 12.00 12.00 12.09 14.00 14.00 14.00 Lending (av) 15.13 15.30 15.44 15.55 15.64 15.88 16.95 16.55 M1 (end-period; Bufr bn) 63.93 65.71 69.29 69.30 78.76 75.90 68.57 71.11 % change year on year 27.8 34.1 41.9 36.3 23.2 15.5 –1.0 2.6 M2 (end-period; Bufr bn) 80.94 89.35 95.44 99.70 109.15 108.59 99.55 104.78 % change year on year 17.2 30.5 47.3 47.7 34.8 21.5 4.3 5.1 Foreign trade (Bufr m) Exports fob 2,776 9,004 10,081 11,684 8,128 6,207 9,208 n/a Imports cif –16,723 –15,151 –17,604 –22,752 –28,525 –27,824 –26,959 n/a Trade balance –13,947 –6,147 –7,523 –11,068 –20,397 21,617 –17,751 n/a Foreign reserves (end-period; US$ m) Reserves excl gold 59.46 58.98 47.98 43.87 42.95 42.80 32.92 42.74 Source: IMF, International Financial Statistics.

Outlook for 2001-02

Political outlook

Domestic politics There is a good chance that a new transitional government headed by the president, Pierre Buyoya, will be installed by November 1st, as envisaged by the peace summit held in Arusha, Tanzania, on July 23rd. This will mark the official beginning of the peace agreement, which maps out a transition process scheduled to culminate in democratic elections three years later. Opposition to a transitional government headed by Mr Buyoya is widespread among Burundi’s Tutsi community, who fear that his government is too ready to compromise with Hutu politicians whom they regard as génocidaires. This sentiment is deeply rooted in the armed forces as well; after two recent failed coups, the balance of power within the armed forces will be critical to the success or failure of the transition.

The main factor in favour of the transitional government being installed, despite considerable opposition, is the support it has from the Front pour la démocratie au Burundi (Frodebu), Burundi's main Hutu party. Frodebu is heavily faction-ridden. Its external wing, headed by Jean Minani, has managed to secure some regional and international recognition of its claim to be the “true” Frodebu, undercutting the internal wing which is in government with President Buyoya. Confusingly, this had led to a situation where the external faction supports the agreement—one of its own members, Domitien Ndayizeye, who actually lives in Burundi, is to be the second transitional president—while many in the internal faction oppose it. However, the transition is essentially a continuation of the internal wing's current partnership with President Buyoya, and the sweetener of cabinet posts should be sufficient to win its support.

The transition government is also supposed to include all 19 signatories to the Arusha agreement. The offer of government jobs and attendant access to patronage with which to reward supporters may also persuade a few of the smaller Tutsi parties opposing the Buyoya-led transition to change their minds. Some of the Tutsi parties who signed the Arusha agreement, but oppose Mr Buyoya, will not join the transitional government. They will thus be well placed to increase their support if Tutsis' fears of genocide worsens during the transition. This is entirely possible. The main appeal of the transitional government to Hutus and Frodebu is that it promises a Hutu president in 18 months. As the months go by, Frodebu members' anticipation of power can only intensify, as will Tutsi anxiety. The last time a Hutu government ruled Burundi, Tutsi agitation and a military coup was the result. This will lead some in Frodebu to urge restraint, although it is not clear that they will be listened to.

Mr Buyoya has promised to reform the armed forces, bringing in more Hutus, and, if a ceasefire permits it, members of the Hutu rebels also. If he fails to carry out significant reforms, he risks opposition not just from Frodebu but from regional leaders, who have threatened renewed sanctions if commitments

Mr Buyoya made to them at the July 23rd summit are not honoured. However, as Mr Buyoya is well aware, the risks of reform are equally great. Reform of the armed forces prompted the 1993 coup attempt that killed Frodebu president Melchior Ndadaye, and launched the current civil war. Present indications are that the war will continue into, and probably beyond, 2002. The two Hutu rebel forces, the Forces pour la défense de la démocratie (FDD) and the Forces nationales pour la libération (FNL), oppose the Arusha agreement and have pledged to continue fighting. Increased pressure on the FDD to leave the Democratic Republic of Congo (Congo) will drive more rebel soldiers into Burundi, further intensifying the conflict. In theory the new transitional government is supposed to negotiate a ceasefire. However, it will be an enormous challenge for it to agree a common position on negotiations with the FDD and FNL. Nor do negotiations, should they begin, look auspicious, given the FDD and FNL’s maximalist demands that the Burundian army return to barracks—a condition Mr Buyoya could never agree to as the army, on whom he depends, would not accept it. It is possible that the FDD and FNL may wait for a Hutu transitional president to take over before starting negotiations, although this would not change the fact that the armed forces themselves will still be an immovable obstacle to military reform.

International relations The Congolese government and its ally, Zimbabwe, is now under pressure from the UN observer mission in Congo (MONUC) to comply with the Lusaka peace agreement and disassociate itself from the FDD, and the Rwandan ex-FAR and interahamwe. Congo, which had relied on the FDD to supplement its weak and ineffective army, is now believed to favour its departure home. The FDD’s open presence in Katanga province, particularly in the Zimbabwean-controlled provincial capital, Lubumbashi, is therefore likely to be scaled down in the coming months as many FDD units return to Burundi or move into South Kivu province; this points to a further upsurge in fighting. However, the degree to which aid to the FDD has been completely severed is not clear. Otherwise, in international relations the Burundian government’s main objectives are to consolidate international support for the transition. Backing from the regional heads of state has been crucial for Mr Buyoya’s efforts to reach an agreement on the transition in which he remains president. Given the previously implacable hostility of these countries to his government after he took power by coup, he may now view this support with some satisfaction. Regional heads of state are adamant, however, that he must leave office at the end of the first 18 months of the transition. Support from foreign donors is also now expected to increase once all-party agreement is reached and the transition is under way by November as planned.

Economic policy outlook

The government’s economic policy, supported by its main donors, the World Bank and EU, will remain that of stabilising the economy and preventing poverty from worsening, while political efforts are made to advance the transition and secure a cease-fire. Despite the ongoing violence, the World Bank and other donors are set to provide funds for public works programmes, aimed at rehabilitating basic infrastructure and services with the greatest

impact on poverty reduction. The government has exhausted World Bank funds available for currency auctions, although fresh funds may be made available under a new emergency economic recovery credit (EERC) before the end of the year. The IMF has indicated that it is prepared to enter into a staff- monitored programme (SMP) with Burundi, but there is still no indication as to when this might happen. The government has announced that it will attempt to privatise the telecommunications utility—providing that a strategic partner can be found under current conditions—but has done little to advance the process so far. Though donors committed themselves in December 2000 to providing assistance to support the peace process, many will wait until the establishment of a transitional government before releasing funds.

Economic forecast

Economic growth The rate of economic growth is expected to rise over the forecast period as a result of increased foreign assistance, which will support higher social sector expenditure and improve the availability of foreign currency to the private sector. Increased agricultural output, at least relative to the severely depressed harvests of recent years, may also contribute to recovery. However, the upsurge in fighting, continued displacement, and the fact that the disbursement of international support has been delayed by uncertainty over the transition mean that recovery is likely to be weaker this year than expected. Accordingly the Economist Intelligence Unit has downgraded its forecast for real GDP growth in 2001 to 2.8%, although this may pick up to 4% or higher in 2002, assuming that the transition and international support are both consolidated.

The official and parallel exchange rates are not expected to converge fully, although the differential between the two will narrow, assuming the government resumes the currency auction system. Average annual inflation is expected to fall to around 14% this year and 10% in 2002 following improved agricultural production which, given the heavy weighting of basic foodstuffs in the consumer price index, has a strong impact on headline inflation. Otherwise, the main cause of inflation will be the fiscal deficit, which the government is financing through borrowings from the Banque de la République du Burundi (BRB; the central bank). However, increased donor support is expected, allowing the government to cease financing its deficit this way.

Burundi: forecast summary (US$ m unless otherwise indicated) 2000a 2001b 2002b Real GDP growth (av; %) 1.8 2.8 4.0 Consumer price inflation (%) 22.0 14.0 10.0 Merchandise exports fob 32.2 24.0 21.0 Merchandise imports fob 110.0 125.0 135.0 Exchange rate (av; Bufr:US$) 680.0 900.0 1000.0 Coffee (arabica; US cents/lb) 87.1 66.0 57.0 Tea (US$/kg) 1.9 1.7 1.6 Oil (Brent; US$/barrel) 28.5 26.8 25.5

a EIU estimates. b EIU forecasts.

External sector Burundi’s export performance will be poor in 2001 as a result of a weak coffee harvest and falling international prices, the latter of which we forecast will decline by 32% in 2001 and 16% in 2002. The one positive outlook for exports is tea; tea output is expected to rise in 2001-02, in the absence of drought, compensating for weaker international prices. Imports are projected to rise substantially on the back of improved availability of foreign exchange supported by higher inflows of donor assistance. Although the trade balance will deteriorate, this will be covered by increased balance-of-payments support from donors.

The political scene

President Buyoya is to be At a time when some observers were starting to write off his mediation, the first transitional president former South African president, Nelson Mandela, may have resolved one of the major obstacles to the implementation of the Arusha peace accord—the lack of consensus on who should be the transitional president. A summit attended by Mr Mandela, the main Burundian political parties, and three regional heads of state in Arusha, Tanzania, on July 23rd officially confirmed, as the Economist Intelligence Unit expected (May 2001, pages 22-23), that the president, Pierre Buyoya, will be the first transitional president under the peace process. After the first 18 months of the transition under Mr Buyoya, the second phase of the peace process would take place under a Hutu president. However, small, predominantly Tutsi, parties and a rump of the internal wing of the predominantly Hutu Front pour la démocratie au Burundi (Frodebu) continue to oppose a prolonged Buyoya presidency and boycotted the summit. Some of these party leaders have said Mr Mandela has betrayed them in agreeing to Mr Buyoya heading the transition.

Tutsi soldiers attempt Further underlining the fragility of the peace initiative, there was a short-lived another coup coup attempt involving at least 100 soldiers—and according to some reports over 1,000—on the night of July 22nd. The coup attempt was foiled by loyal troops the next morning and the dissident forces fled north to Ngozi, where they surrendered. The coup attempt underlines the distrust, even hatred, of Mr Buyoya within sections of the armed forces and the Tutsi community who oppose the political compromises he is prepared to make to the Hutu opposition in the context of the peace process. It was also the second coup attempt this year and, as such, a further indication of Mr Buyoya’s political vulnerability. The first, on April 18th (May 2001, pages 24-25), was equally short-lived, and has been followed by an estimated 200 arrests of suspected participants or sympathisers. Many of those arrested were soldiers affiliated with Jean-Baptiste Bagaza's Parti pour le redressement national (Parena). A report into the April coup by the Ministry of Justice has found that there was no official Parena involvement.

The leadership issue stalled Mr Mandela proposed that the transition presidency be split in two, with a the Arusha peace process Tutsi president ruling first and a Hutu second, in February after it became apparent that the negotiators in Arusha could not achieve consensus on their

own. The ethnic crudeness of the proposal shocked some Burundians, although it has been effective in reaching a compromise (May 2001, page 28). The process remained stalled throughout May with President Buyoya determined that he should be the first transitional president, while an alliance of opposition parties proposed Colonel Epitace Bayaganakandi, a Tutsi from Mwaro, and Domitien Ndayizeye, of Frodebu instead. Mr Buyoya also stuck with his earlier declaration that none of the transitional institutions envisaged in the Arusha agreement would be put in place, including the transitional presidency, until a ceasefire was agreed with the rebels.

Frodebu and Uprona agree On June 13th a Frodebu delegation aligned to the external wing travelled to compromise on leadership South Africa officially to lobby Mr Mandela over whether Mr Buyoya or Mr Bayaganakandi should be the first transitional president. On June 21st, Mr Buyoya and a delegation of military officers and his supporters within the Union pour le progrès national (Uprona) party also attended talks with Mr Mandela in Pretoria. In the midst of these discussions, Mr Mandela called on the Frodebu delegation to return and join them. The delegation did so, and it seems that it was during these talks that Mr Mandela’s proposal that Mr Buyoya be the president for the first half of the transition, and Domitien Ndayizeye his vice-president, was tentatively accepted. The issue of who should be the second transitional president was left till later. Since this compromise was sure to be opposed by Mr Bayaganakandi's supporters within the small, predominantly Tutsi parties and the internal wing of Frodebu, who oppose Mr Ndayizeye, it was not formally announced. However, Mr Mandela said publicly that a breakthrough was imminent.

Mr Mandela judged that the new compromise had enough support from Frodebu and Uprona—Burundi's largest parties and the only ones to make any impression in the last elections in 1993 (3rd quarter 1993, page 30)—to force the measure past its smaller and weaker opponents. Mr Mandela has previously at least paid lip service to the importance of all the 19 parties that signed the Arusha agreement, but after the latest consultations in Pretoria spoke openly of their irrelevance compared to Uprona and Frodebu.

Heads of state endorse At the Organisation of African Unity (OAU), now the African Union (AU; see Buyoya—with conditions Foreign trade and payments), summit in Lusaka, Zambia, in July Mr Mandela worked to gain international acceptance for the compromise on the leadership and increase pressure on the dissenting Burundian parties to agree to it. At a meeting with heads of state on July 8th during the summit Mr Mandela secured agreement to the Buyoya-Ndayizeye ticket. Mr Mandela immediately returned home to South Africa for a meeting with a block of predominantly Tutsi parties (the G-10) to tell them what had happened and determine which of them were prepared to face regional isolation by sticking to their anti- Buyoya stance. Parena, which is implacably opposed to Mr Buyoya, was not invited. Of the remainder, four left Pretoria siding with Uprona and backing Mr Mandela's proposal, while four others remained resolutely opposed. After the meeting, Mr Mandela made public the conditions on Mr Buyoya's rule, claiming that Mr Buyoya had already agreed to them. These include:

• All 19 Arusha signatories to be represented in the transitional government;

• Mr Buyoya must vacate office after 18 months; • The transitional government must start integrating Hutus and the rebels into the Burundian armed forces;

• The transitional government must invite the international community to provide peacekeepers during the transitional period.

According to the final communiqué of the July Arusha summit, the transition is now scheduled to begin on November 1st 2001. This is apparently not dependent on a cease-fire, a condition dropped by the government after the July consultations in Pretoria, which had earlier led Frodebu to accuse Mr Buyoya of a "coup" (May 2001, page 29). It has been suggested, but not confirmed, that de-linking the start of the transition from a cease-fire was Mr Mandela's condition for backing Mr Buyoya.

Defence ministers discuss The defence ministers of South Africa, Nigeria, Ghana, Senegal, Burundi and Burundi peacekeeping Belgium met on July 5th in Pretoria to discuss peacekeeping in Burundi. All except Burundi and Belgium pledged troops, but made this conditional on the prior implementation of a cease-fire. The troops would have a UN peacekeeping, but not peace-enforcing, mandate, much like the current UN observer mission in Congo (MONUC) and the UN mission to Rwanda (UNAMIR); in the latter case this limitation prevented UN forces from intervening to prevent the genocide. The ministers declined to reveal whether troop numbers had been discussed, saying that this would be "premature". A technical committee is preparing to go to Burundi to study the logistics of any operation.

The rebels continue to Absent from the July 23rd summit were representatives of the two rebel groups, reject a cease-fire the Forces pour la défense de la démocratie (FDD) and the Forces nationales pour la libération (FNL). The leaders of both groups, Jean-Bosco Ndayikengurukiye of the FDD and Agathon Rwasa of the FNL, have repeatedly rejected the entire Arusha process, and say they will not stop fighting. So far they have been true to their word, and the war has continued (see below). Both say they want a negotiated bilateral agreement with the Burundian government, which they regard as synonymous with the Burundian army high command. They have also posed some difficult demands, including the return to barracks of the Burundian armed forces, and the immediate release of all political prisoners.

The South African deputy president, Jacob Zuma, has been holding talks on Mr Mandela's behalf with the leadership of the FDD and FNL about a ceasefire but has encountered serious problems. Mr Ndayikengurukiye openly accused Mr Zuma of being biased against him at a meeting in Libreville on April 17th hosted by the Gabonese president, Omar Bongo, and attended by Mr Zuma, Mr Ndayikengurukiye, the Congolese president Joseph Kabila, and Mr Buyoya (May 2001, page 28). Mr Zuma's difficulty is that he has no mandate to mediate a ceasefire process outside the context of the Arusha agreement, which the rebel militia reject. After the Libreville meeting, Mr Ndayikengurukiye called for Mr Bongo to be made co-mediator in talks between the FDD and the Burundi government, and reiterated his call for bilateral talks independent of the Arusha process. Mr Zuma has agreed to Mr Bongo's co-mediation, which

was confirmed at the July 23rd summit. There are increasing calls, from the well-respected Brussels-based think-tank, the International Crisis Group (ICG) and Mr Buyoya among others, to accede to Mr Ndayikengurukiye’s other demand, for cease-fire talks to be separated from the Arusha process. In late July discussions were under way for direct talks between President Buyoya and the FDD’s Mr Ndayikengurukiye. The talks are being facilitated by Mr Zuma, standing in for Nelson Mandela who is recovering from surgery for prostate cancer.

Mediation team accused of Mr Zuma has struggled to even meet the FNL’s Mr Rwasa, who has been sabotaging peace process extremely elusive over the last few months, apparently busy travelling with his militia between eastern Congo, Tanzania and Burundi. Mr Rwasa is closer to Mr Ndayikengurukiye than was Cossan Kabura, whom Mr Rwasa ousted as FNL leader in February, and military co-operation between the FDD and FNL within Burundi is increasing. A recent report by the respected Burundi analyst, Jan Van Eck of the Cape Town-based Centre for Conflict Resolution, argues that although it appears to the international community from their frequent no- shows at meetings that the FDD and FNL are not interested in peace, this is not the case. According to Mr Van Eck, it is in fact the Tanzanian mediation team bequeathed to Mr Mandela by the last mediator, the former Tanzanian president, Julius Nyerere, which is responsible for the rebels’ absence. The report says the team has sabotaged efforts to arrange meetings between the Burundi government and the FDD and FNL, treating the FDD and FNL with “contempt" and regularly failing to give them notice or formal invitations to meetings. This has undermined the confidence of the FDD and FNL in Mr Mandela, which has not been encouraged either by his increasingly forthright condemnation of them. The ineptitude of the mediation team, mostly employed by the Nyerere Foundation, has long been known, although acceptance of it was the price of Tanzania supporting Mr Mandela as mediator after the death of Mr Nyerere in late 1999.

Mr Ndayikengurukiye’s Another report by the ICG released in May claims that Mr Ndayikengurukiye's support in FDD is waning authority within the FDD is on the wane. According to the ICG, the FDD's massive defeat, alongside Zimbabwean and Congolese troops and Rwandan rebels, by the Rwandan government army at Pweto in Congo last December had a damaging impact on morale (February 2001, page 14). The coherence of the FDD in Congo had begun crumbling even before this, according to the report, with two FDD units having deserted Congo for Burundi without authorisation from Mr Ndayikengurukiye. The report says a faction within the FDD has accused Mr Ndayikengurukiye of embezzlement, and that many FDD fighters are protesting that the conflict in Congo is not their war. Relations between the FDD and the Congolese army have been poor since the defeat at Pweto, for which the late Congolese president, Laurent Kabila, held Mr Ndayikengurukiye and the FDD responsible. The new Congolese president, Joseph Kabila, has little affection for the FDD and wants it to leave Congo. An important motivation for this is that the UN mission in Congo (MONUC) is establishing mechanisms to monitor the disarmament and repatriation of “negative forces” like the FDD and the interahamwe militia responsible for the 1994 genocide in Rwanda. The prospect of examination and possible exposure

of the relationship between the Congolese government, the Zimbabwean armed forces, the FDD and the interahamwe means that there is an obvious advantage in severing, or at least weakening, these links.

Armed skirmishes continue The ICG estimates that 4,000 FDD soldiers have crossed back into Burundi in all over the country recent months, and warns that more are coming. The Burundi government has claimed that many of the recently returned FDD soldiers have fresh military supplies, suspected to have been provided by the Congolese government. One government source claims that such support is payment for the FDD’s services in the Congo war.

The FDD and FNL have formed a tactical alliance and are edging closer to the capital together with some interahamwe and former Rwandan army (ex-FAR) troops. A siege mentality has settled in Bujumbura—fundamentalist churches preaching heavenly salvation are filled to capacity and Tutsi youth militias regularly do military training in the streets.

Also apparent in Bujumbura and elsewhere in Burundi are recently formed gardiens de la paix, a pro-government militia consisting of Hutu former rebels, whose presence makes many Tutsi uneasy, but whom the army high command insists are “reliable”. There has been a series of skirmishes, raids and ambushes in the past quarter all over Burundi, particularly within striking distance of the rebel’s main hide-out—the Kibira forest, which runs through Bubanza province, where fighting reportedly displaced over 20,000 people in June and July.

Violent clashes continue There have also been frequent attacks near Burundi's border with Tanzania. along Tanzanian border The minister of defence, Cyrille Ndayirukiye, and his Tanzanian counterpart, Philemon Sarungi, met in Dar es Salaam, Tanzania, in late June to discuss this situation and their joint communiqué conceded that despite "strong political will" security had not improved since their last meeting in late 2000. The Burundian government regularly accuses the Tanzanian authorities of not doing enough to stop Burundian rebels crossing its borders, something Tanzanian regularly denies. The Centre for Conflict Resolution warned in its May report that the close proximity to the border of Tanzania's Burundian refugee camps was a recipe for disaster and could precipitate military strikes from the Burundian armed forces similar to that in 1996-97 of Rwanda against refugee camps in eastern Zaire which were then a base for attacks against it.

The number of displaced The Norwegian Refugee Council (NRC) released estimates in late June showing people continues to rise that the number of Burundians internally displaced by the continued civil war has risen from 500,000 earlier in the year (May 2001, page 32), to about 580,000. Of these, 380,000 are in camps, while 200,000 are dispersed around the country. The NRC has cautioned that the war made it impossible for its research teams to travel freely, and there could be serious errors or omissions in its findings. The NRC noted large concentrations of internally displaced people (IDPs) in Burundi's southern provinces of Makamba, Bururi and Rutana. HIV infection is spreading at an alarming rate through the IDP camps, which UN officials blame on collapsed family structures, and the high incidence of rape. The France-based humanitarian agency, Médecins sans frontières (MSF), has in place an anti-retroviral distribution programme for rape victims in the camps.

Economic policy and the economy

New war taxes are A 10% wage increase for all civil servants was announced by President Pierre introduced Buyoya during an independence anniversary address on July 1st. Further new expenditure measures were also unveiled, including funds for state-run pharmacies and small agricultural projects. Civil servants are uncertain that they will continue to receive the higher wages in the future. The cash-strapped government took the unpopular measure on May 5th of introducing new indirect taxes to finance the war effort, which took effect on May 21st. An official announcement on state radio, described as a joint effort between the ministries of finance and defence, asked the population not to be "surprised" to see price increases for a range of products. Taxes on beer and soft drinks, which have been a large source of government revenue since the onset of war and

economic crisis, were increased by up to 23%. The tax on tobacco and sugar was increased by 11%. It is not clear how much revenue the government hopes to raise through the new tax measures.

The latest price rises, and declining domestic purchasing power, have dented sales for Burundi’s sole brewer, Brarudi, which has recently laid off over 40 employees. Weakening domestic demand has been partly offset by informal exports to Rwanda and the Democratic Republic of Congo. On May 4th Brarudi also launched an official export drive to Rwanda.

The government’s domestic borrowings, although relatively stable, have shown a steady shift from borrowing from the commercial banks towards borrowing from the Banque de la République du Burundi (BRB; the central bank). Net claims on central government in monetary terms, the sum of all domestic borrowing, showed little change during the first half of the year. From Bufr49,887bn at the end of last year, this had declined slightly to Bufr48,972bn by April 2001. In light of the government’s weak domestic revenue position and the slowness in the resumption of large-scale aid, this is some achievement—at least if the data are to be believed. During the same period, deposit money bank claims on central government (a more accurate measure of commercial bank lending) declined from Bufr220 to Bufr159bn.

Although the auctions of foreign exchange designed to provide access to imports for the private sector and to steady the exchange rate were ended earlier this year, when World Bank funds for the initiative were exhausted, the currency has remained relatively stable. The Burundian franc's official value was Bufr782:US$1 at the end of 2000, but had fallen to Bufr844.9:US$1 by July 20th, a nominal depreciation of 8%. The depreciation of the parallel rate was only slightly sharper, falling from Bufr940:US$1 at the end of 2000, to Bufr1,020:US$1 on July 25th, a depreciation of 8.5%.

Agriculture

Agricultural output A joint assessment in June by the Ministry of Agriculture, the UN Food and improves despite the war Agriculture Organisation (FAO) and the UN World Food Programme (WFP) of Burundi's 2001 "B" season, which runs from February to July, concluded that despite the war agricultural output was higher than the year before. This was attributed to good rains, the distribution of seeds by humanitarian agencies, and the relatively low incidence of crop disease. The FAO reports that many farmers have switched from bean to root and tuber cultivation, particularly cassava, since these are more drought tolerant and require less labour input. However, this is the cause of some concern as these crops are poorer nutrient sources than beans. Displacement, both internally to the cities and abroad, has led to a shortage of farmers and, hence, farm produce. The FAO reports that surplus produce is being sold immediately, rather than stored. Another factor mitigating against storage is the high incidence of theft, particularly in areas directly affected by the civil war. This has caused market prices to fall, although once the current harvest season passes, prices are expected to rise steeply due to the absence of stocks. The WFP, in co-ordination with other humanitarian agencies, is moving ahead with a country-wide feeding programme, though

there is some concern about whether there are enough resources to do so thoroughly.

Foreign trade and payments

Most donor funds are still The bulk of the US$440m in funds pledged by donors for Burundi at a undisbursed conference in Paris in December 2000 (February 2001, pages 34-35) remains undisbursed. Donors have cited the ongoing conflict and the lack of a transitional government as the reasons, though the World Bank, the EU, France and Belgium have delivered some of the funds promised (May 2001, page 33). The EU is dissatisfied with the pace at which donors are paying up, and issued a statement in early July calling for the swifter implementation of the pledges made in Paris. The US Agency for International Development (USAID) had revealed earlier that it has spent US$28m in Burundi so far in 2001, most of which is for humanitarian and emergency relief, while the EU unveiled a US$18m package for humanitarian assistance in late April. In mid- June, the UN reported that there had been a disappointing response thus far to its 2001 inter-agency appeal for humanitarian assistance, for which it had requested US$102m; only 15% of requirements were delivered between January and May.

The African Union comes Burundi has ratified the new African Union (AU) treaty which has replaced the into being former Organisation of African Unity (OAU). President Pierre Buyoya attended the 37th annual OAU heads of state assembly in Lusaka, Zambia, on July 2nd- 11th. The Zambian president, Frederick Chiluba, took over the chairmanship of the organisation from President Gnassingbé Eyadéma of Togo. The assembly formally implemented the Constitutive Act of the African Union (AU), following Nigeria’s ratification of the Act on April 26th, allowing the Act to enter into force 30 days after the deposit of the instruments of ratification. The formation of the AU had been agreed at the 36th annual assembly of the OAU, held in Togo in July 2000, with the AU to replace the OAU following ratification by two-thirds of member states. The OAU secretary-general, Salim Ahmed Salim, has said that there will be a transitional period of approximately one year to allow the AU to become fully operational. Amara Essy, Côte d’Ivoire’s foreign minister for most of the 1990s, will replace Mr Salim in September, having been elected interim secretary-general, but he is mandated to serve only until May 2002. (See Rwanda, Foreign trade and payments, for terms of the AU).