COUNTRY REPORT
Rwanda Burundi
August 2000
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Contents
3 Summary
Rwanda
5 Political structure 6 Economic structure 6 Annual indicators 7 Quarterly indicators 8 Outlook for 2000-01 8 Political forecast 10 Economic policy outlook 10 Economic forecast 11 The political scene 19 Economic policy and the economy 21 Agriculture 22 Infrastructure 24 Foreign trade and payments
Burundi
26 Political structure 27 Economic structure 27 Annual indicators 28 Quarterly indicators 29 Outlook for 2000-01 29 Political forecast 31 Economic policy outlook 31 Economic forecast 32 The political scene 38 Economic policy and the economy 41 Agriculture 41 Foreign trade and payments
List of tables
25 Rwanda: debt after rescheduling 39 Burundi: industrial production (selected items), Jan-Mar 40 Burundi: government finances, Jan-Mar 43 Burundi: foreign debt, 1999
List of figures
7 Rwanda: exchange rate 7 Rwanda: foreign reserves 19 Rwanda: gross domestic product
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28 Burundi: exchange rate 28 Burundi: foreign reserves 38 Burundi: exchange rates, 1999
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August 11st 2000 Summary
August 2000
Rwanda
Outlook for 2000-01 President Paul Kagame has appointed several previously discredited politicians, indicating that he wishes to create the impression of a more inclusive govern- ment. The government plans to empower community courts, gacaca, to try genocide cases. This is causing growing domestic disquiet as many Hutus fear that the process will result in their crimes being unmasked. Renewed fighting between Rwandan and Ugandan forces in Kisangani, and meetings between Mr Kagame and the presidents of Congo and Kenya, has reinforced the view that Rwanda is repositioning itself in the region. Real GDP growth is expected to reach 5% in 2000, owing to unexpectedly good agricultural output.
The political scene Mr Kagame was elected president by parliament on April 16th. The former prime minister, Pierre-Célestin Rwigema, has sought political asylum in the US. A report by the US-based Human Rights Watch has alleged growing authoritarianism and abuse of power in Rwanda. The Roman Catholic bishop of Gikongoro has been acquitted of genocide charges and released. Increased incursions by the interahamwe have been reported in the north-west. The Organisation of African Unity has published a report on the genocide, recommending that the international community pay reparations to Rwanda. Fighting broke out between Ugandan and Rwandan forces in Kisangani in June, and was condemned by the UN Security Council. Mr Kagame has met the Congolese president, Laurent Kabila, in a meeting brokered by the Kenyan president, Daniel Arap Moi, with whom Mr Kagame has also exchanged bilateral visits.
Economic policy and the The government is drafting a poverty reduction strategy paper (PRSP), which it economy hopes to have completed by September in time for consideration by the boards of the IMF and World Bank. A large budget deficit is looming because of the absence of budget support from the World Bank, which requires that the PRSP be completed first. VAT is to come into effect on October 1st at a rate of 15%. The government has had a dispute with the IMF about off-budget expenditure. Food production for the 2000 “A” season harvest rose by 20%.
Foreign trade and Rwanda has met the requirements for access to the heavily indebted poor payments countries debt-relief initiative. A decision will be made on this by the boards of the World Bank and IMF in December.
Burundi
Outlook for 2000-01 Nelson Mandela, the mediator in peace talks in Arusha, Tanzania, aims to have a peace agreement signed by August 28th, although many observers believe that this date is too soon as the main parties remain far apart. Mr Mandela clearly hopes to create momentum towards signing an agreement, leaving some substantive issues to be worked out later. International pressure may be
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effective against the main parties involved in the talks, although the Hutu rebel groups appear to be immune to this. The different regional dimensions to the conflict will become more important, as Tanzania, Zimbabwe and Congo will be urged to encourage the rebel groups to participate in a peace agreement. The government and Western donors are in agreement that the main priorities are to stabilise the economy and promote rehabilitation to assist the peace process. The IMF hopes for greater policy reforms before it begins assistance. The resumption of international assistance, following a confidence-building agreement with the World Bank, will help to spur a modest recovery this year, with GDP growth of 2%.
The political scene The latest round of peace talks in Arusha, on July 17th-23rd, failed to produce an agreement. The CNDD-FDD rebels attended for the first time, although the FNL stayed away. Mr Mandela maintains that only two main points are at issue: who should head the transition, and when a ceasefire can take place. The deployment of foreign troops to provide implementation guarantees has been rejected by the government and the army. The military situation has deteriorated, with increased fighting in the south-east, around Bujumbura and in Congo. The UNHCR is reportedly planning for the return of refugees from Tanzania. Bilateral relations between Tanzania and Burundi have improved and the minister of defence, Cyrille Ndayirukiye, travelled to Dar es Salaam for talks in July.
Economic policy and the The World Bank has approved a US$35m emergency economic recovery credit economy (EERC) of US$35m for Burundi, to be used to support social sector expenditure and provide access to foreign exchange for the private sector. The first foreign- currency auctions have been held. Government revenue is up, moderately, although official accounting remains opaque. The north-eastern provinces have been hit by drought. Preliminary evidence suggests that the tea and coffee harvests this year are above expectations.
Foreign trade and Foreign donors are preparing substantial assistance to support rehabilitation in payments the event that an agreement emerges from Arusha. In the meantime some donors have already increased their aid, including the EU which has approved a ¤48m assistance programme.
Editor: Douglas Mason Editorial closing date: July 25th 2000 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 70 members, appointed by the government in consultation with party leaders
National elections December 1988 (presidential and legislative); next elections 2003 (presidential and legislative); local elections September 2000.
Head of state President, Paul Kagame (acting).
National government Self-appointed in July 1994; consists of ministers from the RPF, MDR, PSD, PL, PDI and PCD; last reshuffle June 2000
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 (independent) Education Emmanuel Mudidi (RPF) Energy, water & natural resources Marcel Bahunde (independent) 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 Théobard Gakwaya Rwaka (PCD) 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 Jean de Dieu Ntiruhungwa (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
1995 1996 1997 1998 1999a GDP at market prices (Rwfr bn) 337.2 431.1 562.5 631.7 652.5 Real GDP growth (%) 34.4 15.8 12.8 9.5 5.3 Consumer price inflation (av; %) 22.0 9.0 7.4 4.0 –2.0 Population (m) 5.7 6.2 7.7 7.90 8.10 Exports fob (US$ m) 51.2 61.7 93.0 62.4 70.8 Imports fob (US$ m) 198.1 218.7 277.4 255.7 242.0 Current-account balance (US$ m) 51.5 –9.8 –59.0 –97.3 –121.2 Reserves excl gold (year-end; US$ m) 99.1 106.7 153.3 168.8a 174.2 Total external debt (year-end; US$ m) 1,029 1,043 1,111 1,212a 1,300 External debt-service ratio, paid (%) 20.4 19.8 13.3 30.8a 48.2 Green coffee productionb (‘000 tonnes) 22.0 15.3 14.8 14.3 16.5 Exchange rate (av; Rwfr:US$) 290.0 306.8 302.4 317.0 333.9
July 21st 2000 Rwfr359:US$1
Origins of gross domestic product 1998 % of total Components of gross domestic product 1998 % of total Agriculture 43.8 Private consumption 93.4 Industry 19.9 Public consumption 8.6 Services 35.1 Gross fixed capital formation 15.8 Others (incl import taxes) 1.2 Exports of goods & services 5.6 Total 100.0 Imports of goods & services –23.4 GDP at market prices 100.0
Principal exports 1998 US$ m Principal imports cif 1998 US$ m Coffee 25.9 Intermediate goods 65.2 Tea 22.9 Capital goods 60.0 Hides 2.0 Food 56.3 Pyrethrum 0.9 Other consumption goods 75.0 Cassiterite (tin ore) 0.4 Energy 34.2
Main destinations of exports 1999c % of total Main origins of imports 1999c % of total Germany 11.4 Kenya 24.7 Pakistan 7.9 US 15.6 Belgium 7.5 Belgium 6.4 Italy 5.9 France 3.6 Kenya 4.0 India 2.3 a EIU estimates based on IMF, World Bank and national data. b Crop years (Apr-Mar) starting in year stated. c Based on partners’ trade returns; subject to a wide margin of error.
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Quarterly indicators
1998 1999 2000 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr Prices Consumer prices (1995=100) 130.5 126.5 124.0 124.6 123.2 124.8 126.3 126.6 % change year on year n/a 5.9 –4.1 –4.3 –5.6 –1.3 1.9 1.6 Financial indicators Exchange rate Rwfr:US$ (av) 308.1 311.5 323.5 327.8 337.2 332.9 337.9 357.2 Rwfr:US$ (end-period) 312.4 317.2 320.3 342.6 337.7 334.7 349.5 366.1 Interest rates Deposit rate (av; %) 8.44 8.46 7.96 7.73 8.07 8.03 7.97 8.01 Discount rate (av; %) 11.13 12.63 11.38 11.56 11.13 10.81 11.19 11.19 M1 (end-period; Rwfr bn) 52.87 48.55 55.29 51.69 57.64 58.32 59.24 57.87 % change year on year 0.1 –5.7 –0.8 5.4 9.0 20.1 7.1 12.0 M2 (end-period; Rwfr bn) 82.75 85.13 91.48 93.05 94.54 98.92 98.87 97.11 % change year on year –1.5 5.7 3.5 7.8 14.2 16.2 8.1 4.4 Foreign trade (Rwfr m) Exports fob 4,595 6,571 3,527 3,111 7,496 5,914 3,814 4,223 Imports cif –19,734 –25,948 –23,841 –21,441 –20,634 –21,238 –21,195 –17,714 Trade balance –15,139 –19,377 –20,314 –18,330 –13,138 –15,324 –17,381 –13,491 Foreign reserves (end-period; US$ m) Reserves excl gold 149.5 154.9 168.8 160.3 171.1 156.7 174.2 159.3 Source: IMF, International Financial Statistics.
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Outlook for 2000-01
Political forecast
Domestic politics Paul Kagame is only one hundred days into his presidency, but his latest government appointments have strengthened his grip on Rwanda’s administration. Some of the most prominent of these appointments include individuals previously regarded by many commentators as having fallen out of favour with the Rwandan Patriotic Front (RPF). It would seem that their appointment is intended to dispel the increasingly popular criticism that the ruling elite runs the country as a closed shop and excludes others, especially Hutus. Equally, the appointments may also be an indication that the talent pool for top jobs in Rwanda is not limitless.
However, it is clear that Mr Kagame wishes to dispel the growing anxiety stirred by a series of high-level resignations this year—including the president, the prime minister, the parliamentary speaker and several cabinet ministers— and by several allegedly political assassinations. These developments raised the prospect of heightened political competition which, given Rwanda’s recent past, the public had viewed with rising concern. In April the US-based organisation, Human Rights Watch (HRW), released a controversial report detailing alleged abuses of power and suppression of dissent. This has added to the impression that, after six years in power, the RPF is narrowing rather than broadening its base of support. The government has denounced the HRW report, which some donors have also criticised (see The political scene), and clearly wishes to dispel these sentiments and create the impression that it is more inclusive towards a range of domestic opinions. However, a prominent figure with whom the government had hoped to be reconciled publicly, the former prime minister, Pierre-Célestin Rwigema, has spurned this offer and instead sought political asylum in the US, underlining the fact that the government must do more if its claims of inclusiveness are to be credible.
The government’s plans to establish traditional courts, gacaca, to try genocide cases will cause growing domestic disquiet. The move is designed to deal with the backlog of genocide cases, which the overloaded formal justice system is unable to handle. Although intended to resolve the lingering issues of justice and reconciliation, the plans promise to reopen old wounds. Tutsi survivors are worried that gacaca, which traditionally takes place on the “hill” where the offence was committed, will allow the perpetrators to intimidate them into silence. Perpetrators who have not been arrested are also frightened that they will be unmasked. Gacaca will start with those prisoners who have confessed to genocide already, although for confessions to be accepted they must provide considerable detail—which is then supposed to be verified—about any others involved. The fact that the accused will be naming names in front of their communities has led to concern that the process will end with many more people being accused and tried for genocide.
International relations The renewed fighting between Rwandan and Ugandan forces in Kisangani in June will have helped to further redefine the relationship between the two
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countries, reinforcing the view that their once formidable alliance is irreparably damaged despite periodic public attempts at rapprochement. Moreover, both countries will be following essentially different agendas in their involvement in the war in the Democratic Republic of Congo. Rwanda can justifiably claim that it is pursuing legitimate security interests in Congo in its conflict with the interahamwe forces responsible for the 1994 genocide, whereas there is an increasing impression that Uganda’s interests focus on commercial gain. Another development that may pit Rwanda against Uganda, as they struggle to increase their strategic influence in Congo, is the growing ambition of the Ugandan-backed Mouvement pour la libération du Congo (MLC). The MLC has made military gains in the past quarter as it moves south and west, closer to the Congolese capital, Kinshasa, and Ugandans evidently believe that the MLC’s leader, Jean-Pierre Bemba, could be a credible national leader in the event of the Congolese president, Laurent Kabila, being overthrown. Mr Bemba’s leadership aspirations are untested but they are at least more credible than those held by any of the potential candidates from the Rwandan proxy force, the rebel Rassemblement congolaise pour la démocratie (RCD). The MLC’s intentions will certainly be of concern to the RPA, and this has helped to fuel speculation about Mr Kagame’s recent meeting with Mr Kabila in Kenya (see The political scene).
Rwanda is determined to shake off Uganda’s lingering impression that it may be viewed as a junior partner or protégé, and the fact that it has inflicted two or possibly three military defeats on Uganda in Kisangani has reinforced this determination. In Mr Kagame’s view, at least, any improvement in relations over the next year will depend on the extent to which the Ugandan president, Yoweri Museveni, fundamentally alters this impression of Rwanda. However, Mr Museveni faces a powerful and vociferous anti-Rwandan lobby in the Ugandan parliament, although his recent victory in the “no-party” referendum may strengthen his position enough for him to withstand these pressures. In the meantime, further military clashes inside Congo cannot be ruled out. The withdrawal of Rwandan and Ugandan forces from Kisangani has created a vacuum which may be hard for either party to resist. In the meantime, the RCD have maintained their presence in the city and there are allegations that Uganda has maintained a covert presence as well.
The Rwandan government will seek improved relations with Kenya, one of its major conduits for foreign trade and a member of the East Africa Co-operation community, which Rwanda wishes to join. Relations between the two governments have traditionally been cool, though it seems both sides now see benefits in improving relations, as shown by the recent meeting between Mr Kagame and the Kenyan president, Daniel Arap Moi. Moreover, Mr Moi has long viewed Mr Museveni with suspicion and evidently wishes to capitalise on the rift between Uganda and Rwanda. The next logical step for Rwanda is to cultivate its relations with Tanzania, which is competing for a higher share of Rwanda’s trade. However, Tanzania is cautious about the Rwandan government and is suspicious of its regional ambitions.
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Economic policy outlook
The government’s economic policy will continue to focus on macroeconomic stability, market reform and increasing social sector delivery—the factors underpinning its strategy of achieving rapid, poverty-reducing growth. Raising agricultural productivity in the small-holder farming sector remains an important government policy objective, but although the policy framework is sound the constraints to achieving this are formidable. These include serious land pressures and limited government capacity to facilitate the emergence of product and input markets and promote productivity-raising innovations. As a result, any gains will be slow and incremental. However, the government does believe that rapid income gains can be realised from the rehabilitation of the smallholder-dominated coffee sector, and it is aiming to draw increased investment to this area through the deregulation and encouragement of processing facilities (see Economic policy and the economy). The government predicts that the revival of the coffee sector will put roughly Rwafr6bn (US$16.7m) per year into the hands of farmers.
The formulation of a poverty reduction strategy paper (PRSP) remains a key government objective, particularly as the completion of the PRSP is a prerequisite for access to the heavily indebted poor countries (HIPC) debt-relief initiative. The process is behind schedule as the PRSP is meant to be in place already, and public consultation on it has yet to be completed. Rwanda hopes to gain access to debt relief under the HIPC, although consideration on a decision point by the boards of the World Bank and IMF is not scheduled until December 2000, at the same time as the review of the country’s poverty reduction and growth facility (PRGF). As a result, this will increase pressure on the government to meet its policy reform commitments and targets under the PRGF. Political factors can also play a role in gaining the approval of the World Bank and IMF boards, and the government will be aware of this with regard to its conduct in the war in Congo.
A large budget deficit is looming this year, owing to the fact that the World Bank has not been able to allocate budget support for this year before its new country assistance strategy is in place (see Economic policy and the economy). As this lies outside the government’s control, it is believed that a compromise arrangement is likely to be found among donors before the end of the year to cover the budget gap.
Economic forecast
Economic growth Growth is expected to remain robust this year, driven by higher agricultural output and by strong growth from the services sector. The IMF and the World Bank forecast real GDP growth for Rwanda at 5% this year, and 6% in 2001. As a result of an unexpectedly good agricultural performance this year, the EIU believes that the government’s estimate for 2000 is credible and we have lifted our forecast for real GDP growth slightly, from 4.5% to 5% this year. Assuming that there are no adverse climatic conditions, a similar performance can be expected in 2001, underpinned by high, if gradually declining, inflows of
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foreign aid. The government hopes to finance a growing proportion of investment from domestic sources. Gross domestic investment as a proportion of GDP is forecast to rise from 14.2% in 1999 to roughly 18% in 2000-01. Roughly half of this amount is expected to be private investment, partly as a result of the privatisation programme which aims to have sold most of the tea sector and the electricity and telecommunications parastatals by the end of next year.
External sector The outlook for Rwanda’s agriculture-dominated exports remains mixed, although moderate growth in overall levels is possible. We expect tea prices to rise by 4.1% to $1.75/kg in 2000. Combined with an expected increase in production—possibly as much as 27%, based on early harvest data—export levels should perform well. However, this will be partly offset by a weaker performance from the coffee sector owing to lower international prices, which are forecast to fall by 2.1% this year—the third consecutive year of decline. A scheme to boost coffee prices has been announced by the Association of Coffee Producing Countries, but it is not yet clear whether this will successfully spark a recovery in prices (see Foreign trade and payments). Production forecasts are also poor, and this year’s coffee harvest has reportedly fallen by around 11% on the equivalent period in 1999. Import growth in 2000 should be modest, despite robust real GDP growth which is generally import-dependent. A stronger-than-expected agricultural performance for food crops, which the UN Food and Agriculture Organisation believes to be up by about 20%, may produce some import substitution.
Net foreign assistance is expected to decline this year, continuing the downward trend of recent years from the high levels which accompanied the immediate post-war reconstruction. Net official transfers, which have averaged US$287m annually since 1994, are expected to total US$202m this year.
The political scene
Paul Kagame puts his Major-General Paul Kagame was elected president of Rwanda by the country’s stamp on the government parliament and cabinet on April 16th, winning 81 votes against five for Charles Murigande, the general secretary of the Rwanda Patriotic Front (RPF) who made a token effort at running for the presidency because the RFP was required to field at least two candidates. Mr Kagame was constitutionally required to leave his position as minister of defence, and the post has been taken over by Colonel Emmanuel Habyarimana, the former deputy minister of defence. Mr Habyarimana, a Hutu, is a former member of the Forces Armées Rwandaises (FAR), which fought the RPF from 1990 until 1994, when elements of the FAR played a key role in carrying out the genocide. There is, however, no suspicion that Mr Habyarimana had any direct role in this. In the time since his election Mr Kagame has made his mark on Rwanda’s foreign and domestic policies, showing that even if he was Rwanda’s de facto ruler before becoming president, being the de jure ruler has made a difference.
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An appearance of In late June Mr Kagame made several new government appointments. He reconciliation is promoted promoted those closest to him, such as Emmanuel Ndahiro, an advisor to the Ministry of Defence, who now becomes presidential adviser on security. More interestingly, Mr Kagame has also rehabilitated several ousted politicians who had fallen foul of the RPF in various ways; for example, the former minister of finance, Marc Rugenera, has been appointed to the board of the Banque nationale du Rwanda (the central bank), and the former minister of state in the office of the president, Patrick Mazimpaka, has been made a special envoy. Other notable appointments include that of the talented former minister of energy, Bonaventure Niyibizi, who has been made director of the new investment promotion agency. The rehabilitation of the fallen politicians is significant, as it appears to break the previous pattern whereby many former government members were forced to flee the country, such as the former parliamentary speaker, Joseph Sebarenzi, who fled to the US. It is suspected that some of those who fled have been assassinated by the security services abroad, such as the former minister of the interior, Seth Sendashonga, who was killed in Nairobi, Kenya in May 1998 (3rd quarter 1998, page 31). Mr Kagame’s appointment of the politicians has therefore been widely interpreted as an indication that he wishes to avoid the impression that his government is not an inclusive one, or that those who disagree with it politically have reason to be fearful.
The former prime minister However, these efforts have been quickly and publicly undermined by the seeks asylum in the US former prime minister, Pierre-Célestin Rwigema. After months of speculation that Mr Rwigema’s position was precarious, Mr Kagame instead appointed him chairman of the telecommunications parastatal, Rwandatel. Evidently this was meant to be a magnanimous gesture, underlining that Mr Rwigema had little to fear by remaining in Rwanda. On July 24th, however, Mr Rwigema announced that he was seeking political asylum in the US and denounced the Rwandan government, claiming that he had received death threats. The incident is certainly an embarrassment for the Rwandan government, and a set back for its new strategy of reconciliation. Only shortly after Mr Rwigema made the public denouncement, government members reportedly stated that corruption charges against him had not been dropped and may be reopened.
Rwanda and Uganda Since Mr Kagame took office the long-standing dispute between Uganda and fight in Kisangani Rwanda has once again reached a head, underlining the apparent breakdown of efforts to restore their former alliance. Fighting between the Rwandan Patriotic Army (RPA) and the Uganda People’s Defence Force (UPDF) broke out in Kisangani on May 6th, provoking strong criticism from the UN, EU foreign ministers and the US ambassador to the UN, Richard Holbrooke, who blamed Uganda for the fighting and called on both sides to withdraw from the city. Although a slow withdrawal of troops began a week later, under the supervision of UN military observers, tension between the two sides erupted into renewed fighting on June 4th. This was the third, and most serious, incident of fighting since the city was occupied two years ago, and caused extensive damage and 760 deaths, most of them civilian according to the International Committee for the Red Cross. The RPA and UPDF had already clashed in Kisangani in August 1999 (4th quarter 1999, pages 9-10). After a
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week of fighting, a ceasefire finally took effect when—apparently—Ugandan forces were ordered to withdraw. Although the Ugandan government denies it, evidence suggests that the RPA soundly defeated the UPDF. The fighting, in blatant disregard of the ceasefire agreement, caused international outrage. The UN secretary-general, Kofi Annan, and the French government asked the UN Security Council to consider sanctions against Uganda and Rwanda, and a demand for their immediate withdrawal—to the delight of the Congolese government. However, the final Security Council resolution, number 1304, avoided any mention of sanctions or a deadline for withdrawal, apparently under pressure from the US and UK. As such it is consistent with the Lusaka accord, which calls only for a withdrawal of Uganda and Rwanda together with the Congolese government’s allies, Zimbabwe, Angola, and Namibia.
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The Rwandan and Ugandan governments have consistently avoided calling the conflict between them in Congo a war, and talk instead of “misunderstandings”. On June 10th, however, Mr Kagame stated to the EIU that it was unacceptable that the Ugandan president, Yoweri Museveni, would not tolerate forces other than his own being in charge in the area, and that this was the source of the problems in relations between the two countries. Mr Kagame also strongly condemned comments made by Mr Museveni alleging a need for more broadly- based politics in Rwanda, and he was particularly incensed that Mr Museveni had referred in parliament to the Rwandan government as “boys”. A meeting between the two leaders was eventually held on July 2nd in Entebbe, Uganda, and afterwards Mr Kagame stated that the two had discussed the cause of their current problems and agreed on solutions. Neither side revealed what these solutions would be.
New reports allege human Two human rights reports released in late April, by the London-based rights abuses organisation, Amnesty International, and by the New York-based Human Rights Watch (HRW), have alleged disappearances and widespread abuse of power by the RPF. The HRW report (available at: www.hrw.org/reports), written by the prominent US academic and Rwandan expert, Alison Deforge, has had the greatest impact as it details allegations of extra-judicial killings, political intimidation and, ominously, the establishment of paramilitary “solidarity camps”, known as ingando. Participants in the camps, run by the National Commission on Unity and Reconciliation, are given military training and lessons in nationalism and the RPF’s view of Rwandan history. According to HRW, all students wishing to enter university are required to attend the camps, also community leaders and those joining the civil service or wishing to return to private employment. Separate camps have been set up for populations from the north-western prefectures of Ruhengeri and Gisenyi, where an insurgency threatened to take hold in the late 1990s, and those who have recently returned from Congo are particularly targeted. The HRW report has been rejected by the Rwandan government and even by some donors, who have criticised its methodology and judgement. The UK’s minister of co-operation, Clare Short, publicly criticised the report during a trip to Rwanda in May, underlining the strong degree of British support for the Rwandan government.
Despite questions over the accuracy of the report, on the whole it has raised the impression of an authoritarian trend in Rwanda, which the government itself now appears concerned to address. Otherwise there is little sign of either outward dissent in the country or serious doubt over the government’s legitimacy—members of the public, particularly in rural communities, tend to avoid overt involvement in politics and concentrate instead on rebuilding their livelihoods. In addition, the Rwandan government has won praise for the manner in which it has promoted national reconciliation in recent years, after the trauma of the 1994 genocide, through what is undeniably a locally-rooted process conducted with little outside help or interference.
Attacks are made on the A number of attacks made by the interahamwe militia on Rwanda’s north-west north-west border border with Congo were reported in May and June. They were the first such attacks in several months, and resulted in at least 15 deaths. The government
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has played down the significance of the incursions, although local humanitarian sources report that the militia have forcibly recruited locals, including children. Nonetheless, there is little indication that the security situation is deteriorating and the government is, perhaps rightfully, confident that it has the capacity to maintain security in the area. This is not least because of the extensive intelligence network the government operates, which penetrates down to cells of ten houses. In addition, there are some indications that the increased incursions are a result of growing pressure on the interahamwe in Congo, where communities have set up self-defence forces against them and are increasingly rejecting them because of their habitual violence and abuse of the local population.
The UNHCR is repatriating The UN High Commission for Refugees (UNHCR) is undertaking a successful Rwandan Hutus operation to repatriate the remaining Rwandan Hutu populations from north and south Kivu who fled to Congo following the 1994 genocide in Rwanda. There are now estimated to be roughly 40,000 expatriate Rwandan Hutus remaining (22,000 have already returned in the past year), and they are being repatriated at a rate of 400 per week. More controversially, it appears that some former interahamwe members are among the repatriated populations, and they have been accepted into Rwanda with the knowledge of the Rwandan intelligence services, who evidently find it preferable to remove these populations from the potential control of the interahamwe and the ex-FAR. When the operation is complete it will bring to an end one of UNHCR’s most controversial involvements—its role, along with other aid agencies, in supporting the estimated 2m Rwandan refugees in Congo during 1994-98 was widely regarded as having provided resources to the former Rwandan government and army who carried out the genocide of an estimated 800,000 Tutsis and moderate Hutus in 1994.
Gacaca courts are to be The law empowering the traditional conflict resolution system, gacaca, to try established by September genocide cases was approved by the Supreme Court in early June, and from there it was referred to parliament. In mid-June the government appointed the former secretary-general to the minister of justice, Aloysie Cyanzaire, as vice- president of the Supreme Court in charge of gacaca. Before the system can come into force special gacaca judges must be elected and trained, and the minister of justice, Jean de Dieu Mucyo, says that the system will not be ready before September. Mr Mucyo believes that with gacaca the judicial system will be able to process the 120,000 outstanding genocide cases within three years. It is estimated that at the current rate the existing justice system would require 300 years. Gacaca is to begin with the trials of 20,000 prisoners who have now confessed—16% of the total. However, the imminent threat of justice has apparently caused growing anxiety among those who believe they may be un- masked by gacaca. In late June the UNHCR stated that some Rwandans from the north-east had crossed into Tanzania since March. The government claims this is exaggerated, but concedes that some people may have done this out of concern over the gacaca process.
In another development, the national constitutional commission was established on June 21st, to which parliament elected its 12 members on July
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10th. The commission is to draft a new constitution, and is to conduct consultations with Rwandans about this.
Bishop Misago is acquitted The Roman Catholic bishop of Gikongoro, Augustin Misago, has been acquitted of all charges, including genocide, and released following a long trial in Kigali which ended on June 15th. The Roman Catholic church welcomed Monsignor Misago’s release, alleging that his detractors had an anti-Catholic agenda. The state will not appeal against the decision. The case had attracted considerable publicity as an assessment of the Roman Catholic church’s complicity in the genocide, something which it has long rejected. It has refused calls to conduct an inquiry into the matter. The trial was also seen as a showdown between the Rwandan government and the Catholic church (4th quarter 1999, page 13). The state’s case was widely viewed as having failed, partly because of shoddy work by the prosecutor’s office and partly because of the exceptionally good defence team paid for by the Catholic Church.
Georges Ruggiu, a Belgian-Italian who worked for the notorious Radio télévison libre mille collines in 1994—it played a prominent role in inciting Hutus to kill Tutsis during the genocide—was sentenced to 12 years in prison by the International Criminal Tribunal for Rwanda (ICTR) in Arusha, Tanzania on June 1st. Mr Ruggiu pleaded guilty and expressed remorse for having played a role in the genocide.
The appeal against the sentence of the former prime minister, Jean Kambanda, was heard by the court later in the same month. Mr Kambanda pleaded guilty to genocide in 1998 and was sentenced to life imprisonment (2nd quarter 1998, page 27), but he now claims that he had expected a lighter sentence because of his plea and alleges that he was forced to plead guilty. Mr Kambanda’s case is a curious one; because the expected detailed confession of a high level member of the previous government never materialised in court, a unique opportunity to learn about the genocide was missed. A recent report about the genocide, made by a panel appointed by the Organisation of African Unity (OAU) refers to hundreds of hours of taped conversations between ICTR officials and Mr Kambanda while he was in detention, isolated from his peers, but nobody outside the ICTR appears to know anything about their contents.
The Twa stand up for Rwanda’s long-suffering Twa community (the original hunter-gatherer people their rights of the region, otherwise known as pygmies) held a conference with other regional indigenous peoples in Kigali on June 28th which was intended to address their grievances. In an open letter to President Kagame on the eve of the conference, Zephyrin Kalimba, leader of a Twa organisation, pleaded for proper consideration. He stated that his people were excluded from development, had lost one-third of their number during the genocide, and were heading for extinction. The government has promised to address Twa concerns through the National Unity and Reconciliation Commission, though the absence of any Twa from the commission itself is not a good sign. The main problem facing the Twa is that they have no land, few means of creating livelihoods for themselves and, in the eyes of many Hutus and Tutsis, little status.
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OAU report on the genocide The OAU eminent persons panel, chaired by the former president of Botswana, calls for reparations Sir Quettumile Masire, delivered its report on the Rwandan genocide in early July. The report makes some serious allegations, particularly against the US, which is now under pressure to authorise an investigation of its own role during the genocide—something which the US president, Bill Clinton, had perhaps hoped to avert with his public apology at Kigali airport in 1998 (2nd quarter 1998, page 28). Since the publication of the OAU report the US secretary of state, Madeleine Albright, who was Mr Clinton’s ambassador to the UN at the time, has said it is wrong to blame the US for the genocide. The Catholic church, which is also apportioned considerable blame in the report, said it was surprised by the allegations but would respond in due time.
The main conclusions of the OAU genocide report
• The UN (Carlsson) report on the genocide, which admits that its failure to act on clear warning signs of impending catastrophe was a “costly error of judgement”, is in fact too kind to the UN—its negligence was far more serious, and even criminal.
• The mandate of the UN assistance mission to Rwanda was racist, in that it acted to save the lives of foreign nationals but not Rwandans.
• The US administration deliberately avoided use of the word “genocide” soon after the killings began in 1994; the OAU report cites evidence of US policy discussions which considered the negative electoral impact of terming the killings “genocide” without intervening.
• The US government failed to intervene in Rwanda, and actively prevented others from doing so.
• The finding of the French parliamentary information mission that France has no responsibility for the genocide is contradicted by available evidence.
• France, despite its subsequent denials, armed Rwanda’s genocide perpetrators after their flight to Zaire in 1994.
• The hierarchy of the Catholic church was a bulwark of the genocidal regime until the end and therefore bears some responsibility for this.
• African heads of state are to blame for not denouncing the genocide in 1994.
• The Rwandan Patriotic Front has been guilty of major human rights abuses during the past decade––actions condemned by the OAU panel––but it is not guilty of genocide.
• There is no Tutsi-Hima conspiracy to dominate the region, and the Congolese government should cease claiming that there is.
One of the most important, if controversial, conclusions of the report is that Rwanda, and specifically its community of genocide survivors, is owed reparations by the international community. The report also recommends that Rwanda’s debt be cancelled, and that the government should acknowledge,
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rather than deny ethnicity in its efforts to rebuild nationhood. The report draws no conclusion on the extent of Mr Museveni’s support for the RPA prior to its 1990 invasion of Rwanda, although apparently this is based on Mr Museveni’s own testimony. The report has been enthusiastically endorsed by the Rwandan government, particularly the call for reparations. Donor countries have barely responded to the call for reparations, perhaps in the belief that the report will soon be forgotten, or that its call for reparations has scant legal basis. Moreover, many of them may argue that they already have substantial aid programmes in place––inspired in part by guilt over the genocide––and that this is sufficient recompense. Rwandan government sources say they do not anticipate a special reparations fund, but feel that the issue will help the country’s chances of gaining debt relief under the heavily indebted poor countries initiative (see Foreign trade and payments).
Rwanda’s relations with Mr Kagame has met the Kenyan president, Daniel arap Moi, in an apparent Kenya improve attempt at rebalancing regional relations in light of the conflict with Uganda. Rwanda’s post-1994 relations with Kenya have been rocky because of Mr Moi’s close ties with the former Rwandan president, Juvénal Habyarimana, and Kenya’s initial welcome for Rwanda’s top genocide suspects, most of whom subsequently either left the country, or were arrested and sent to the ICTR in Arusha. The Kenyan government was apparently angered by the suspected role of the Rwandan government in the assassination of former Rwandan minister of the interior, Seth Sendashonga, in Nairobi in May 1998 (3rd quarter 1998, page 31). Kenya also had close relations with the late president of Zaire, Mobutu Sese Seko, and reacted negatively to the reconfiguration of regional power caused when he was overthrown by Uganda and Rwanda in 1998. Now, however, the Kenyan government, which has long had poor relations with President Museveni of Uganda, says that it wishes to form closer relations with Rwanda. Mr Moi visited Kigali in mid-May; following this the two countries re- established diplomatic links, and Mr Kagame reciprocated with a two-day visit to Kenya on July 14th.
Mr Kagame meets President Kagame held a surprise meeting with his former ally and current his adversary adversary, the Congolese president, Laurent Kabila, in Eldoret, Kenya on June 3rd. The meeting, brokered by the Kenyan president, was the first encounter between the two since the second Congo war began in 1998. There has been much speculation about the motivation of the respective parties in agreeing to the meeting. The fact that the meeting was held at the behest of Mr Kabila has encouraged the belief that he is looking for an alternative to the current stalemate, particularly as he is now showing less willingness to comply with elements of the Lusaka accord pertaining to the holding of the planned national dialogue and to domestic political reforms, following his formal rejection of the OAU-appointed mediator, Sir Quettumile Masire, in June. At the same time, however, Mr Kabila does appear to wish to maintain those elements of Lusaka concerning a ceasefire and a withdrawal. In this respect it is notable that the April ceasefire (May 2000, page 13) along the front line between Congolese and Rwandan troops has largely held over the past quarter, even as it crumbled in the north under the Ugandan-backed Mouvement pour la libération du Congo (MLC), which has made further military gains.
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The meeting has prompted much concern in Uganda, where it has been interpreted as indicating that Mr Kabila wishes to make a separate deal to thwart the resurgent MLC. Jean-Pierre Bemba, the MLC leader, insists that Mr Kagame and Mr Kabila are plotting against him. However, the MLC’s military advances threaten both mens’ interests in Congo, but as yet there is insufficient mutual trust for them to strike a reliable deal. Indeed, it is far more likely that each side wished to sound out the weakness of the other rather than seek any agreement. Otherwise, the two leaders stuck to their familiar positions. Mr Kagame said that he would withdraw the Rwandan Patriotic Army from Congo if Mr Kabila took effective action against the Rwandan interahamwe militia. Mr Kabila apparently assured Mr Kagame that he would and insisted that his position as president be considered non-negotiable. However, the interahamwe are a key element of Mr Kabila’s military strategy to bring the war to the borders of Rwanda (May 2000, page 13), and there are few signs that he is prepared to reverse this now—there is growing chaos and conflict in the Congolese provinces of north and south Kivu, bordering Rwanda. Indeed, there is growing evidence that Mr Kabila is actively breaking the ceasefire by arming the non-state actors who are not signatories to Lusaka, the so-called “negative forces” including the interahamwe, Mai Mai and the Burundian rebel Forces pour la défense de démocratie (FDD), whose military capacity has been substantially improved in the past six months.
Economic policy and the economy
The poverty reduction The president, Paul Kagame, officially launched Rwanda’s poverty reduction strategy is being drafted strategy paper (PRSP) on June 1st at a special sitting of parliament. The government had already presented its interim strategy proposals to foreign donors at a conference in February, which emphasised increased agricultural productivity, investment in human capital, better social safety nets and rapid employment-creating growth (May 2000, pages 16-17). The government wants to have the PRSP in place by September, before Rwanda’s access to the heavily indebted poor countries (HIPC) debt-relief initiative is considered by the boards of the IMF and World Bank in December.
The drafting of the PRSP is meant to be a participative exercise, and the World Bank is actively encouraging the Rwandan government to take ownership of the formulation process and conduct widespread consultation with domestic civil society groups. However, in line with its more enduring habits, it also requires a poverty reduction strategy which its experts consider economically sound, and which is delivered according to a tight time frame consistent with the schedule for considering Rwanda’s access to the HIPC initiative. As a result, the Rwandan government has opted to speed up the process, drafting the strategy with IMF and World Bank experts first, clearing it with donors, and then seeking public consultation.
A large budget deficit It now appears that Rwanda may experience a substantial shortfall in funding its is looming budget this year, largely because of the conflicting schedules for completing the various policy framework agreements with the IMF and World Bank. The World
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Bank has not provided budget assistance for the current year, owing to the fact that to do so it needs to have a new country assistance strategy (CAS) in place. A new CAS cannot be agreed, however, before the PRSP is completed. The Bretton Woods institutions believe that the PRSP should be completed by August in order to meet the other associated deadlines for the CAS and HIPC, although others have suggested that this would compromise the quality of the PRSP consultation exercise. Several donors have expressed concern about this development, and the UK’s Department for International Development is apparently to lobby the World Bank and the IMF in Washington on Rwanda’s behalf.
VAT is delayed Rwanda’s value-added tax (VAT) law was passed by parliament on April 28th, until October replacing the turnover tax (1st quarter 2000, page 16). Earlier in the month, the government announced that the implementation date had been set back from July 1st to October 1st to allow for adequate preparation. The government also announced that the VAT rate would be 15%––somewhat less than the 17% requested by the IMF. The IMF had also wanted a VAT threshold of Rwfr20m (US$56,000) on annual turnover per business, while the government argued for Rwafr35m. The IMF eventually accepted the higher rate proposed by the government.
Performance under the A joint mission of the IMF and World Bank visited Rwanda in June to review PRGF is endorsed progress under the poverty reduction and growth facility (PRGF; see Foreign trade and payments). The mission was broadly positive about the Rwandan government’s economic management since 1994, and attributed most of the shortcomings to implementation and capacity constraints on the government rather than lack of political will. However, it has drawn attention to weaknesses in revenue collection. The IMF and bilateral donors suspect that part of the government’s fiscal weakness is caused by the diversion of extra- budgetary revenue to fund the war effort in the Democratic Republic of Congo, and they have apparently been in dispute with the government over this issue since March. The issue particularly concerns taxes from parastatal companies, which the government was suspected of not reporting in its official accounts. The IMF insisted that back taxes be paid, which they duly were although the government borrowed money to do so. The minister of finance, Donald Kaberuka, claimed that the problem had arisen owing to poor accounting and the fact that the companies had lacked the funds to pay these taxes, and stated that the matter has been resolved.
The dispute has highlighted long-standing tension over Rwanda’s funding of its extensive involvement in the war in Congo. Officially, military expenditure is 28% of government spending, although this is far below the likely cost of Rwanda’s war in Congo. According to some estimates, actual military spending in Rwanda is roughly 66% higher than is indicated in official figures, leading to the suspicion that it is being funded through revenue extracted from Congo as well as other extra-budgetary funds (1st quarter 2000, page 15). Donors believe that the official figures are not realistic, but they also appear to have accepted an unspoken agreement whereby as long as the budget deficit and money supply are kept under control (which they are) then the other surreptitious means the government uses to fund the war effort are acceptable.
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Implementation capacity A report on Rwanda’s ability to use its foreign aid, commissioned by the UN is lacking Development Programme, was published in June and has highlighted the fact that state institutions lack the capacity to implement the full project funds available. As a result, according to the report, only 60% of funds pledged by donors is released, of which only 45% is actually disbursed. The report ascribes this to a low absorption capacity caused by an inadequately staffed public administration, a lack of appropriate skills and poor project conception. The report also found that a large part of the funds provided for projects devised by the Rwandan government is used to cover ministerial running costs. The report welcomes the establishment of the Central Projects and External Finance Bureau, established by the Ministry of Finance earlier this year (May 2000, page 18), which will assist with the overall government planning process and improve the quality of project conception and implementation.
Agriculture
Tenders are invited for Tenders for the sale of Rwanda’s tea estates were invited in June and the Rwanda’s tea estates deadline for expression of interest is in September. Rwanda’s tea estates, although run-down, are regarded as potentially very profitable and the sale has attracted interest from many of the large international tea companies. However, until recently privatisation has been delayed over the issue of what the level of Rwandan ownership should be. A government report carried out by the UK-based Adam Smith Institute in January argued, unsurprisingly, for minimal government interference in the process, although this was apparently opposed by the privatisation secretariat headed by Vianney Shubusho, which argued for more local ownership. Evidently the government disagreed—in mid- June Mr Shubusho was replaced by Robert Baigama, a local businessman. The two estates with the best tea are said to be Mata and Nshili-Kivu, although the latter has not yet been offered for sale. The total value of its assets was put at US$4.1m in 1999 by consultants, although there is some suspicion that this was an underestimate.
Private ownership of land The government is preparing new legislation which will introduce private is planned ownership of land over the existing usurfructory system, enabling farmers to secure title deeds to their properties. The legislation is due to be completed by next year. The government believes that this will establish a land market and allow land consolidation to take place, enabling larger and more successful farmers to increase the size of their holdings and promote capital accumulation in the rural areas. The initiative has been greeted with caution by those who are concerned that the process may lead to landlessness. This is a sensitive issue; many Rwandans have fled the country over the years as refugees, leaving their property to be occupied by others, and then returned later to reclaim their land. As a result, land ownership is a contentious subject.
The 2000 A harvest The UN Food and Agriculture Organisation (FAO) reported in April that the exceeds expectations 2000 “A” season harvest, despite drought in the east and south, was extremely positive overall. The FAO estimates total food production at 2.8m tonnes, representing a 20% increase year-on-year, which it attributed to improved rains
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in some regions and a larger planted area. This increase is high, reflecting both a rebound from the poor results the year before and, more importantly, the reintegration and gradual settlement of land disputes among returning populations. Despite higher production, the FAO noted that there are still serious problems in some areas, citing a nutritional survey carried out in Ruhengeri in the north-west in December 1999 which found a malnutrition rate of 56%––and a severe malnutrition rate of 2.5%—compared with a national average of 42% based on an earlier survey in July 1999.
Infrastructure
Telecoms and electricity The privatisation of the telecommunications and energy parastatals, Rwandatel sell-offs proceed and Electrogaz, are planned to be completed by the end of 2001. Although the Rwandatel network has benefited from international assistance in recent years its service still remains rudimentary. Revenue growth has also been affected by the success of the Rwandacell mobile phone system introduced in 1998. Rwandacell already has 20,000 subscribers after two years in operation, roughly double the number of subscribers it had expected at this point. Rwandatel currently holds a stake in Rwandacell under a joint venture with Mobile Telephone Networks (MTN) of South Africa, although it is to sell its shares in the company by the end of 2000 in preparation for its own privatisation.
The telecommunications sector is potentially profitable and international interest in its sale will not be greatly lacking, but the government realises that the same cannot be said of the electricity, water and gas utility, Electrogaz, which has failed to make a profit for years. International consultants called to advise on the sale have recommended that rather than attempt to sell Electrogaz, the government should grant concession contracts for private management of the company, which is being split into its water, electricity and gas components. The government now appears to have accepted this recommendation. Although it is not clear when tenders for these concessions are to be offered, the privatisation secretariat has indicated that it expects the process to be completed by the end of next year. Electrogaz has assured residents in Umutara, Rwanda’s least developed province, that it will begin providing power there by the end of the year.
China to finance feasibility China has agreed to finance a feasibility study for a proposed rail link from study on the Isaka rail link Kigali to Isaka in Tanzania—a distance of nearly 500 km—from where the Tanzania railway system provides service to the port of Dar es Salaam. The rail link has been mooted for some time but has never proceeded owing to the high cost of the project, partly because of the mountainous terrain of the proposed route. The government regards the proposed link as being very important because it is seeking to reduce the extremely high transportation costs the country suffers from because of its land-locked status and distance from the sea. The idea was revisited in 1999 after Tanzania unveiled plans to make Isaka a dry port for Rwandan transit goods (3rd quarter 1999, page 16). China’s agreement to finance the feasibility study is taken as a signal that it hopes to secure the engineering and construction contract itself—similar to its backing for the Tanzania-Zambia railway, which it built in the 1970s.
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The Isaka dry port is to become operational this year according to officials, and it is planned that goods destined for Rwanda will travel straight there from Dar es Salaam (where customs clearance will be bypassed). Isaka port covers 4.5 ha, with roughly 12,000 sq meters of stacking space, and officials claim it can handle 360 containers at a time. If successful, the Isaka project will divert a substantial portion of Rwanda’s exiting external trade away from the road route through Uganda and Kenya to the port of Mombasa. Uganda, however, is keen to retain this trade and there is now apparently talk of establishing a dry port at Kampala, Uganda. In addition, it has already refurbished the road between Kabale in southern Uganda to Gatuna in Rwanda’s Byumba prefecture, the main transport route between the two countries, which was officially opened by their respective ministers for public works in June.
Water shortages grip Kigali There was little rain in Rwanda during May, resulting in water shortages in several prefectures, particularly Kibungo and Umutara in the east. Cyangugu and Butare in the south-west have had problems too, while Kigali Rurale appears to be the worst affected. Kigali city is also short of water. The rivers which usually supply the city are increasingly being used by Kigali Rurale inhabitants to irrigate crops because of the lack of rain. In addition there is the problem of Kigali city’s rapidly swelling population. Kigali boasted 100,000 inhabitants before 1994 but this is now estimated to have risen to nearly 600,000, and the city’s infrastructural capacity has not grown to meet the new demand. Officials calculate Kigali’s daily water needs at 22,000 cu metres, but estimate that only 16,000 cu metres is currently available. Plans are in motion for the supply of another 6,000 cu metres of water, which officials claim will be in place by the end of the year.
Netcare sells its shares The South African healthcare company, Netcare, which had been managing in Suremed Kigali’s private King Faycal hospital since 1998, has withdrawn from the hospital’s management and has sold its shares in Suremed, Rwanda’s main medical insurance scheme, to another South African company, MedicExpress. This follow months of poor relations between Netcare and Suremed and the Rwandan investors. Suremed had objected that Netcare was charging too much for the services provided at King Faycal, while Netcare insisted that Suremed was not honouring its obligations as a medical insurance company. The Rwandan investors’ complaint with Netcare was that it had allegedly wasted the US$3m they had provided, and had installed incompetent management at the hospital, charges which Netcare strongly rejected. The international auditing firm, Deloitte & Touche, conducted an audit of the hospital’s management earlier this year and reportedly found shortcomings. This appears to have encouraged the government, one of the major shareholders in King Faycal, to put pressure on Netcare to leave.
The Rwandan investors in King Faycal have long been critical of the government’s role, alleging that in its eagerness to attract foreign input into healthcare it made overgenerous agreements with Netcare and did not exercise due supervision. Netcare has charged that the Rwandan government is not doing enough to protect foreign investors.
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Foreign trade and payments
Rwanda qualifies for HIPC According to a joint mission from the IMF and World Bank which visited debt relief Rwanda in June, the country will meet the technical benchmarks to qualify for debt relief under the heavily indebted poor countries (HIPC) debt-relief initiative. Rwanda’s total external debt at the end of 1999 was US$1.2bn (62% of GDP), or US$605m in net present value terms. This makes for a debt/exports ratio of 560%, even after the full use of traditional debt-relief mechanisms. Even assuming average annual real GDP growth of 5% or more over the next two decades, as well as rising gross investment and increased export earnings, Rwanda’s debt/exports ratio would be expected to fall to about 380% by 2010 and to 300% by 2019. The IMF has therefore concluded that Rwanda’s debt is unsustainable and that the country should qualify for HIPC debt relief, which would reduce the debt/exports ratio to 150%.
Rwanda: debt after rescheduling (net present valuea; US$ m) 1999 2000 2001 2002 2003 Total debt 605.1 601.5 594.5 589.8 588.7 Bilateral 79.1 80.3 81.4 82.7 83.9 Multilateral 526.0 521.3 513.1 507.1 504.8 Total exports 61.2 67.1 69.5 75.0 n/a
a Of public and publicly guaranteed external debt, assuming full use of traditional debt relief mechanisms, for example a Paris Club rescheduling on Naples terms.
Sources: Rwanda authorities; IMF staff estimates.
Rwanda’s debt-service payments are estimated to cost US$43m this year, an estimated 36% of export earnings and 20% of total government revenue, although this declines to 33% and 18% respectively when Paris Club rescheduling is taken into account. The IMF calculates that the debt service/exports ratio will peak at 35% in 2001, and has therefore concluded that Rwanda should benefit from front-loading relief on debt service under the HIPC. The IMF and World Bank are confident that money saved by debt relief in Rwanda would be put to good use, given the government’s policy frameworks for poverty reduction which will officially become part of the poverty reduction strategy paper by December (see Economic policy and the economy). The IMF and World Bank have therefore recommended that Rwanda reach decision point for HIPC at the same time as the approval of the third year of the poverty reduction and growth facility in December, when the issue will be considered by the board of the IMF and World Bank. Under this schedule Rwanda would reach HIPC completion point in 2002.
Coffee producers agree on a The outlook for Rwanda’s coffee-dominated exports remains extremely poor, new retention scheme given weak international prices which have fallen by 22% since the beginning of the year following a 21% decline in 1999. However it may benefit from an export retention scheme, announced by the Association of Coffee Producing Countries (ACPC) on May 19th, intended to cut supplies and force up prices. If successful, the initiative could offset an otherwise extremely poor outlook for
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coffee prices. According to the ACPC, a global surplus of nearly 5m 60-kg bags is looming in the year beginning July 1st. Even this estimate is quite conservative and the EIU’s own projections suggest far greater oversupply in the 2000/01 season (October-September) of around 11.5m bags. The scheme is to stay in place until the average price has risen to 95 US cents/lb, from the current price of roughly 69 US cents/lb. Rwanda, as a small producer, would be exempt from holding back any of its exports. The last such scheme, launched in 1995 by the ACPC, was abandoned because Brazil did not have the finance to support it, although this time it has reportedly offered US$500m to finance local withholding.
The US pledges assistance On June 21st the US Agency for International Development (USAID) announced a pledge of US$15.1m to finance ongoing programmes which aim to promote good governance, social sector assistance and agriculture. USAID has already spent US$48m on these programmes since 1997.
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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); next elections: date not yet set
Head of state President, currently Major Pierre Buyoya
National government Appointed by Mr Buyoya in June 1998
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 Sévérin 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
1995 1996 1997 1998a 1999b GDP at market prices (Bufr bn) 249.9 272.6 337.3 425.1 460.2 Real GDP growth (%) –7.3 –8.4 0.4 4.5 –1.0 Consumer price inflation (av; %) 19.3 26.4 31.0 12.5 26.0 Populationc (m) 5.98 6.09 6.20 6.31 6.42 Exports fobd (US$ m) 112.5 40.1 87.3 64.0e 56.4 Imports fobd (US$ m) 175.6 100.0 96.1 123.5e 93.5 Current-account balance (US$ m) –7.8 –40.3 –1.7 –59.6e –21.2 Reserves excl gold (year-end; US$ m) 209.5 139.6 113.0 65.5e 47.9 Total external debt (year-end; US$ m) 1,158 1,127 1,066 1,200 1,123e External debt-service ratio, paid (%) 27.7 53.5 29.0 61.2 62.9 Green coffee productionf (‘000 tonnes) 30.2 14.5 31.8 16.5 28.5 Exchange rate (av; Bufr:US$) 249.8 302.8 352.4 435.2e 522.0
July 21st 2000 Bufr 662.68: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 1999 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 1998g % of total Main origins of imports 1998g % of total Germany 17.3 Belgium 16.7 Belgium 14.4 Zambia 9.2 US 7.8 Kenya 6.5 France 5.9 France 5.2 Switzerland 3.5 South Africa 4.2 a Estimates based on IMF, World Bank and national data. b EIU estimates. c Mid-year estimates. d Balance-of-payments basis. e Actual. f Crop years (Apr-Mar) starting in year stated. g Based on partners’ trade returns; subject to a wide margin of error.
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Quarterly indicators
1998 1999 2000 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr Prices Consumer prices (1995=100) 190.9 182.2 183.2 180.4 187.2 194.4 209.2 232.0 % change, year on year 16.5 8.8 1.7 –4.9 –1.9 6.7 14.2 28.6 Financial indicators Exchange rate Bufr:US$ (av) 411.6 465.3 502.1 518.8 540.5 577.4 617.5 639.0 Bufr:US$ (end-period) 429.9 490.3 505.2 535.6 548.3 608.4 628.6 650.9 Interest rates (%) Discount (end-period) n/a n/a 12.40 12.55 11.88 12.31 12.09 12.03 Lending (av) n/a n/a n/a 15.07 15.13 15.30 15.44 15.55 M1 (end-period; Bufr bn) 50.01 48.99 48.82 50.83 63.93 65.71 69.29 69.30 % change, year on year 0.7 –0.6 1.3 6.0 27.8 34.1 41.9 36.3 M2 (end-period; Bufr bn) 69.08 68.49 64.77 67.52 80.94 89.35 95.44 99.70 % change, year on year 1.2 –1.0 –6.4 –1.3 17.2 30.5 47.3 47.7 Foreign trade (Bufr m) Exports fob 6,311 4,412 8,873 9,110 2,776 9,004 10,081 14,113 Imports cif –19,582 –19,954 –17,428 –16,830 –16,723 –15,151 –17,604 –22,752 Trade balance –13,271 –15,542 –8,555 –7,720 –13,947 –6,147 –7,523 –8,639 Foreign reserves (end-period; US$ m) Reserves excl gold 87.57 75.26 65.52 68.15 59.46 58.98 47.98 43.87 Source: IMF, International Financial Statistics.
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Outlook for 2000-01
Political forecast
Domestic politics Nelson Mandela, the mediator in the Burundi peace process, is aiming to have an agreement signed by August 28th. Many observers, and most of the negotiating parties, think this will be too soon and are counselling delay. Certainly there are many obstacles to signing, although Mr Mandela has identified just two as critical: who leads the transition, and when and how a ceasefire will be arranged. Mr Mandela is hoping to generate enough international pressure between now and August 28th to force movement on these two issues, leaving the remaining concerns dividing the various political factions negotiating in Arusha to be sorted out after the signing of the agreement. Many observers believe that direct talks between the leaders of the delegations, chaired by Mr Mandela, may be necessary to break the deadlock and achieve an agreement, although this will also require more realistic deadlines.
The parties squabbling over who should lead the transition––President Pierre Buyoya and the Burundian government on the one hand, and Jean Minani, president of the Front pour la démocratie au Burundi (Frodebu), and the rest of the Alliance nationale pour le changement leadership on the other––all want international recognition and endorsement, and are therefore amenable to the pressure Mr Mandela can muster from outside. However, the two Hutu militias whose agreement is needed if the ceasefire is to have any meaning do not appear to care what the international community thinks of them. Mr Mandela has tried to draw the militias into the Arusha process by acting as an advocate of their demands to the Burundian government. The strategy has succeeded to an extent with the Conseil national pour la défense de la démocratie-Forces pour la défense de la démocratie (CNDD-FDD), headed by Jean-Bosco Ndayikengurukiye, which joined the Arusha talks for the first time in July. As a result, there is now the prospect of intensive discussion between the CNDD- FDD and the government about a ceasefire. However, the fact that Mr Mandela has not been able to persuade the Parti pour la libération du peuple Hutu- Forces nationales de libération (Palipehutu-FNL) to join the Arusha process means that a comprehensive ceasefire agreement is still not in reach. The Burundian government also refuses to concede any more of the rebels’ demands—particularly on the issue of political prisoners—requested by Mr Mandela, meaning that he has no fresh enticements to bring the FNL on board. He has instead resorted to warning the FNL that it will be left behind if it does not join Arusha, but this has left the FNL’s leader, Cossan Kabura, unmoved. As a result there is unlikely to be a comprehensive ceasefire in place by August 28th, nor for some time to come.
Mr Mandela’s insistence that other substantive disagreements can be settled after the peace agreement is signed should surprise no one who followed his negotiating strategy in South Africa after his release from prison in 1990. Mr Mandela is acutely aware now, as he was then, of how long-awaited agreements, even if they are incomplete, can generate enough momentum and goodwill to enable the resolution of remaining disputes. One of the reasons for
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this is that after an agreement is reached no one wants to be blamed for its collapse. If the negotiating parties then have to find ways to co-operate in a transitional political framework, a vested interest in compromise can be generated that was absent during negotiations, when the parties were ranged against each other in blocs.
This is what Mr Mandela hopes to achieve in Burundi, and this is why he will keep hurrying things along despite the considered view of many that he is moving too fast and that by setting deadlines that cannot be met he risks devaluing his mediation. Whether this approach will work in Burundi is an open question. One positive sign that it may succeed is that the internal partnership (the agreement between Mr Buyoya and the internal wing of Frodebu that was reached in 1998) remains in place. Although the Frodebu members who participated have been dismissed as stooges by the external wing of the party, have not been taken seriously by most regional heads of state, and are increasingly falling out with one another, they have at least managed to work with Mr Buyoya and the Burundian military for two years. Another positive factor is that all the Burundian politicians likely to serve in the government will be motivated to compromise because of their fear of being branded as responsible for the agreement’s failure.
There is still, however, a major risk that the whole agreement, even if it is signed soon, will unravel. Levels of mutual trust are extraordinarily low in Burundian political circles, and it would not take much to trigger a costly fall- out. One such trigger would be a political assassination, for which there is ample precedent. This would raise the whole issue of guarantees for the peace process, and the demand for foreign troops to be involved, an issue over which the Burundian armed forces show no sign of giving ground. More immediately, without the issue of the ceasefire resolved, there is not only the strong chance that the war will continue regardless of the peace agreement, but also that it will intensify, hardening attitudes on all sides and making compromise even more difficult.
International relations The regional dimensions to Burundi’s civil war will receive growing attention in the coming months. Of particular concern will be the rebel CNDD-FDD’s links with the Congo, where it forms part of a military alliance with the government army of the president, Laurent Kabila. Mr Kabila and Robert Mugabe, the president of Zimbabwe, both of whom have been arming and training the CNDD-FDD, will be under pressure to cease using it as a proxy force in the Congolese war although it is unlikely that either are willing to do this yet. The CNDD-FDD constitutes an important component of Mr Kabila’s military capacity in the Kivus and in his home base of Katanga province, and this will be important as his diplomatic position becomes more isolated following his increasingly open obstruction of the Lusaka peace process. The CNDD-FDD will be encouraged by the outside interlocutors in the Burundi peace process to see its main interests in terms of participation in the peace process rather than pursuit of a military victory in alliance with Congo.
Relations between the Tanzanian government and the FNL seem set to worsen. FNL leaders have been complaining of harassment and intimidation by the
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Tanzanian authorities, and suspect that the Tanzanian government is planning to expel Burundian refugees, the main FNL support base, in the event that a peace agreement is found. The main interest of Western countries will be to promote a conducive environment for the peace process, resuming foreign assistance and stabilising the economy. This policy of “supporting the centre” will also constitute a major victory for the government of President Buyoya, who has long sought to have the donor boycott lifted and his government, implicitly, legitimated.
Economic policy outlook
The government and western donors are broadly in agreement that the country’s main priorities are to stabilise the economy and create the conditions for an economic recovery to run parallel to the peace process. This will be built around the main elements of the World Bank’s interim strategy for Burundi (1st quarter 2000, page 34) and its recently approved Emergency Economic Recovery Credit (EERC) which aims to restore essential social services (health, education) and provide access to foreign exchange for the private sector as a means of aiding economic recovery and poverty reduction. In the meantime, donors will also be indicating the foreign assistance they would be willing to provide if a workable peace deal emerges, in what could be a major international assistance programme. The EU and UN agencies in particular will be working to establish planning frameworks for rehabilitation, including the return and reintegration of up to 1.1m internally and externally displaced refugees, as well as the reintegration of demobilised ex-combatants.
The government has not yet indicated that it is ready to abandon the economic policies that have been in place since regional sanctions and the donor boycott were first imposed in 1996, including the overvalued exchange rate and heavy borrowings from the domestic banking system. The World Bank has not set strict reform conditions for its emergency assistance, but evidently expects that policy dialogue will be more productive following the resumption of foreign assistance. The IMF, however, indicated during discussions with the government in Bujumbura in May that it hopes for progress on lowering military expenditure, unifying the exchange rate and ending the taxation of agricultural exports and other distortions. The government evidently feels that it cannot abandon these policies until further foreign assistance is available, although the fact that many political and military leaders have business interests that profit from these distortions is another factor in favour of their continuing.
Economic forecast
Economic growth The resumption of international assistance will boost economic recovery this year, although progress will prove modest. The World Bank’s US$35m EERC is expected to improve access to foreign exchange for domestic business and reverse years of import compression. However, this will mostly be a confidence building measure. Some recovery is expected in services and even the (small)
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industrial sector, which should benefit from more reliable access to inputs. However conditions are not conducive to any significant recovery in the crucial agricultural sector, which remains hobbled by poor climatic conditions and the severe disruptions of the government’s disastrous regroupment policy (see The political scene). As a result te EIU retains its forecast of 2% GDP growth this year. Should the progress of the peace process be encouraging, more substantial foreign assistance next year could raise real GDP growth to 4% or higher. Political failure, growing extremism or military activity, however, would depress any recovery.
External sector Little recovery is expected in Burundi’s agricultural dominated exports. We expect international coffee prices to fall by 2.1% in 2000 to US$1.01/lb—the third consecutive year of decline––while tea is expected to rise by 4.1%, to $1.75/kg. Although this year’s tea crop has performed better than expected, tea is a comparatively less significant crop in Burundi and export earnings in the important coffee sector are likely to remain stagnant. Substantial recovery in either of these crops cannot be expected under the current conditions of physical insecurity. A currency devaluation would help to increase incentives for producers, although this would also reduce official foreign currency earnings in the short run. In the meantime, increased foreign exchange availability will lead to a rise in imports and a consequent widening of the trade and current-account deficits––made good by foreign aid inflows on the capital account.
The political scene
A peace agreement is still The latest round of the Burundian multiparty peace talks in Arusha, Tanzania outstanding from July 17th-22nd, which are being mediated by the former South African president Nelson Mandela, failed to secure an agreement. Despite the attendance of a key Hutu rebel leader, the other main rebel group again stayed away and denounced the talks. Mr Mandela had hoped that the latest round would be the occasion for the signing of a long-awaited peace agreement but, when it became clear in the lead-up to the talks that this would not happen, he reluctantly changed the date for a signing ceremony to August 28th. Little progress was made this time round, but the occasion was nonetheless significant for the first-time appearance at the multiparty talks of Jean-Bosco Ndayikengurukiye, the leader of the rebel Conseil national pour la défense de la démocratie-Forces pour la défense de la démocratie (CNDD-FDD). Mr Ndayikengurukiye, whose militia is the most powerful of those arrayed against the Burundian army, had boycotted Arusha until now, arguing instead for direct talks with the government, before being persuaded by Mr Mandela to at least come along. However, Mr Ndayikengurukiye showed in Arusha that he has not changed his mind about the relative significance of the Arusha process and bilateral talks, and commented that he had not come to negotiate but merely to show goodwill. He added that the CNDD-FDD would await the Arusha agreement and then present its plan to the government. However, Mr Mandela says that Mr Ndayikengurukiye has given him his word that he will
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sign the agreement. The other main Hutu rebel group, the Parti pour la libération du peuple Hutu-Forces nationales de libération (Palipehutu-FNL), boycotted the Arusha meeting, despite indicating earlier that it might come, citing concern with “intrigues” and Mr Mandela’s alleged lack of objectivity. A statement issued by the Palipehutu-FNL leader, Cossan Kabura, on July 17th expressed shock at Mr Mandela’s call for a ceasefire during the Arusha talks, and called on him to meet its supporters in the Burundian refugee camps in Tanzania which it claims as its constituency.
Leadership of transition The political parties that did make it to Arusha spent much of their time government is an issue bickering about the draft accord, to Mr Mandela’s evident irritation (so much so that, at a conference on women’s involvement in the peace process held at around the same time, he advised that women should turn their backs on their men until they showed a more positive attitude). Mr Mandela told delegates to the main Arusha talks that he saw only two major points of disagreement: who would lead Burundi’s transition, and how and when a ceasefire would be put in place. He called on them to return home and resolve these issues in time for the August 28th deadline.
The leadership of the transition government is becoming a point of contention. On July 20th the Alliance nationale pour le changement (Anac), an unusual alliance of mainly Hutu parties and the Tutsi supremacist Parti pour le redressement national (Parena), headed by the former Burundian president, Jean Baptiste Bagaza, claimed that the leader of the transition should come from among its ranks. Jean Minani, the leader of the external wing of the Front pour la démocratie au Burundi (Frodebu), which is also part of Anac, later commented that if the Burundian president, Pierre Buyoya, were to lead the transition, as the government prefers, there would be a popular uprising which his party would have to support. As noted in a July 12th report from the International Crisis Group, Mr Minani’s position on the transitional leadership is based on the conviction that only Hutu politicians have a right to lead Burundi, and implies a readiness to support the civil war if disappointed. For its part, the government delegation has insisted that President Buyoya should lead the transition as he has been president throughout the process to date.
Views conflict over The second of the sticking points identified by Mr Mandela, the ceasefire, is the ceasefire proving even more contentious. The Burundian army and government argue that a ceasefire should precede the overall peace agreement, but refuse to authorise the army’s return to barracks on the grounds that this would mean the government abdicating its primary duty of ensuring national security. The Hutu rebels say that the ceasefire must be negotiated, preferably bilaterally between themselves and the armed forces, and have put forward their initial conditions. These include the release of all political prisoners and the dismantling of the regroupment camps for those forcibly removed from their homes in a number of provinces since September 1999. One compromise currently being proposed is that the ceasefire and peace agreement should come into effect together. However, it is the insurgency itself which gives the rebels their political leverage, and they show little sign of giving it up.
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Implementation After the Arusha talks closed, Mr Buyoya counselled against rushing the peace guarantees are contentious agreement, which he has been negotiating for three years, and said he wanted to see more work done on the sections about Burundi’s future electoral process and the guarantees of implementation. Mr Buyoya’s comments were intended to reassure ordinary Tutsis and the armed forces, whose support he is determined to retain at this critical juncture. At Arusha arguments about the electoral process concentrated on whether mechanisms should be established to ensure a “safe” level of minority (Tutsi) political representation. Tutsi parties in general supported this, and Hutu parties opposed it. Regarding guarantees, a commission has been working in Arusha for several months now on the issue of how the eventual agreement will be implemented, and what guarantees can be put in place to ensure that it is adhered to properly. Exiled Hutu politicians, such as Mr Minani, want a guarantee of their own safety, and ask that provision be made for international troops to provide this. Tutsi politicians who oppose Mr Buyoya, and those who oppose the entire Arusha process, have also called for foreign troops to stop the Burundian armed forces harassing and intimidating them. The Burundian armed forces and government, however, strongly oppose any international military presence, arguing that it would undermine national sovereignty. The real issue behind this disagreement, however, is the Burundian armed forces’ determination to have a de facto veto over the implementation of the Arusha peace agreement. Should the armed forces decide to halt implementation of the agreement with tactics similar to those used in the past, such as orchestrating campaigns to bring Bujumbura to a standstill (similar to the ville morte campaigns of 1994-96) or by staging a coup, only an international force of some strength would be able to stop them. The resistance the Burundian army has shown to the deployment of an international force illustrates the importance it attaches to retaining this veto.
Mr Mandela hopes to avoid Mr Mandela has sought to maintain momentum by setting tight deadlines for delaying tactics the talks. However, there is nothing he can do about the refusal of the deeply factionalised Burundian elite to make far-reaching compromises. The stance adopted by Anac on who should lead the transition, and that adopted by the armed forces and government on whether there should be international troops to guarantee implementation of the peace agreement, is interpreted as a worrying sign by the mediation team. In particular it suggests that Burundi’s political elite, whom Mr Mandela has previously described as “small men”, are still not prepared to make the deep compromises necessary for peace. The complexity of the plan for the transition to democracy provides abundant material for the various factions of the elite to use to delay progress when they perceive their interests to be threatened. Mr Mandela has done his best to curtail delaying tactics by setting tight deadlines, but it is up to the various parties to make the compromises necessary for a peace deal.
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The build-up to the Arusha talks
April 28th: Mr Mandela visits Burundi for four hours and holds talks with Mr Buyoya, Cyrille Ndayirukiye (the minister of defence) and the army high command.
May 12th: In Rome the government meets a delegation of the CNDD, headed by Léonard Nyangoma—the party from which the rebel CNDD-FDD splintered. The aim of this meeting is apparently to secure Mr Nyangoma’s support for Mr Buyoya’s leadership of the transition, in return for a vice-presidential post.
May 23rd: Hutu rebel leaders and the Burundian army command hold separate talks with Mr Mandela in South Africa. Mr Mandela is characteristically generous in his praise of them afterwards and later meets representatives of Burundian civil society groups.
June 6th: Mr Mandela holds talks in South Africa with Mr Buyoya, who agrees to the suggestion that the Burundian army be composed of equal numbers of Hutus and Tutsis, but again rejects a call for political prisoners to be released, claiming that there are none––an assertion popular among Tutsis. Mr Mandela’s proposals about the composition of the army are deliberately vague, encouraging Hutu rebels to think he means to integrate them into the armed forces, and encouraging Mr Buyoya and his supporters, who oppose this, to suppose he is referring to ethnicity alone.
June 12th-14th: Mr Mandela spends three days in Burundi meeting politicians, army commanders, church leaders, civil society representatives, displaced people and prisoners. Mr Mandela calls on politicians to support Mr Buyoya, while describing the prisons as unfit for human habitation. Mr Mandela calls several times for Mr Buyoya to shift his position on political prisoners.
Late June: The Arusha Commission Five, charged with working out guarantees for the peace agreement, fail to reach agreement on the issue of foreign troops.
The military situation The military situation has deteriorated since April: fighting has intensified in has deteriorated the south-eastern provinces bordering Tanzania, and rebels frequently attack vehicles leaving Bujumbura. The militias are also believed to have been recruiting in the Burundian refugee camps in Tanzania. The most serious clashes have been in the south-eastern provinces, where evidence points clearly to militia forces crossing into Burundi from Tanzania. In early May the invasion of a large militia force caused roughly 7,000 people to flee in Makamba province. By late May rebel attacks in Makamba had become serious enough to force humanitarian agencies to suspend operations, and daytime fighting was reported inside Makamba town, the provincial capital. Fighting has also been reported in the central town of Gitega and in the Kibira forest in the north, although the other main theatre of operations for the rebels has been the area around the capital, Bujumbura-Rurale. Here Palipehutu-FNL guerrillas have established themselves in the hills encircling the capital, despite the brutal regroupment policy launched by the government in 1999 which has moved some 350,000 people to specially guarded camps (1st quarter 2000, pages 28-29). The rebels have carried out regular ambushes on all the major roads leaving Bujumbura and have also staged attacks on Bujumbura itself, in
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Musaga, south of the city centre, and in Kamenge, to the north. The army has prevented the rebels from holding any territory for long and claims to have inflicted heavy casualties, although the rebels have achieved their aim of proving that the armed forces cannot win the war against them. On July 25th the army was forced to launch a major offensive around Bujumbura following repeated attacks by the rebels.
Rebel activity in Congo is The CNDD-FDD is reported to be increasing its military involvement in the increasing Democratic Republic of Congo, where it is aligned with the Congolese government army and the Rwandan interahamwe militia against both Burundi and Rwanda, and is receiving military assistance from both Congo and Zimbabwe. There is renewed evidence that the Congolese president, Laurent Kabila, is actively using the CNDD-FDD as a proxy force to destabilise eastern Congo, together with the interahamwe and the Mai Mai militias, the so called “negative forces” who are not signatories to the Lusaka peace accord. The CNDD-FDD have mounted a sustained siege of Banyamulenge (Tutsi) communities around Fizi and Uvira in Congo, causing the displacement of 35,000 people. The group is believed to be aiming to establish a base in the Haut Plateau area between these two towns, from where it would be able to continue the fight against Banyamulenge and launch raids into Burundi. Humanitarian organisations in the area have come under attack and have been forced to withdraw.
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A damning report on On July 7th the US-based organisation Human Rights Watch (HRW) published regroupment is published a damning report on the Burundian government’s controversial regroupment policy, which has moved an estimated 350,000 people into special camps. Although President Buyoya promised Mr Mandela on June 6th that all the camps would be dismantled by July 31st (May 2000, page 27), it had closed only one-third of them by early July according to HRW. The government has since promised that it will soon close all of the camps. The report has catalogued a series of abuses committed by soldiers guarding the camps, including rape, torture, extortion, looting, summary killings and barring people from access to their fields.
The regroupment policy is contributing to worsening poverty and health indicators according to data from aid organisations. The HRW report quotes medical staff in Bujumbura Rurale as stating that malnutrition and disease has increased five times since regroupment began in the province. A study of mortality rates in camps elsewhere in Burundi has found that twice as many regrouped people were dying from disease and war-related deaths as non- regrouped people. To make matters worse, many of those who have returned from regroupment now have insufficient food and have found their homes looted or destroyed and their livestock gone.
The return of refugees is The prospect of a peace agreement is leading the UN High Commission for being contemplated Refugees (UNHCR) to consider plans for the return of large numbers of refugees, in the event that the peace agreement is signed. This is particularly important for Tanzania—where there are an estimated 340,000 Burundian refugees, about 200,000 of them having fled there in 1972 following anti-Hutu violence–– which has long sought a settlement allowing the return of these populations. However, this prospect is causing anxiety among many of the refugees, who fear that they will have no say in the matter and that they will instead be forced by the UNHCR and the Tanzanian authorities to return home once a deal is in place. Their fear has been fuelled by the sharp reduction in rations introduced to the Tanzanian camps in mid-July. Although the reduction has been necessitated by a shortage of donor funds, many refugees are convinced that it is part of a campaign to weaken their resolve to stay in Tanzania.
Relations with Tanzania There are some signs that Burundi’s strained relations with Tanzania, which it are improving has regularly accused of aiding its rebel opponents, are improving. Despite increased military activity in the provinces bordering Tanzania over the past quarter, the Burundian government has shown unusual restraint in toning down its accusations of Tanzanian collusion with the rebels. Moreover, in a sign that bilateral relations between the countries are normalising, the minister of defence, Cyrille Ndayirukiye, travelled to Dar es Salaam on July 6th to meet his Tanzanian counterpart, Edgar Maokola-Majogo. The two agreed to share more military information and to allow the extradition of prisoners from each other’s territories.
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Economic policy and the economy
The World Bank credit As anticipated by the EIU (May 2000, page 32) the World Bank approved an is approved emergency economic recovery credit (EERC) of US$35m for Burundi on April 25th. The credit will be used in domestic currency auctions intended to increase foreign-exchange access by the local private sector. The counterpart funds generated from the auctions will finance public expenditure designed to rehabilitate essential social services, including health, education and agriculture. The amount granted was at the higher end of the levels originally anticipated, indicating strong support for the World Bank’s interim strategy, which underpins the new credit and is intended to stabilise the economy and provide a framework for other donors to resume assistance to the country (1st quarter 2000, page 34). The approval of the EERC by the World Bank has underlined the decision of the international community to largely abandon their earlier insistence that aid would not be provided before an agreement had emerged from peace talks in Arusha, Tanzania. The major objectives of the interim strategy are to:
• promote good governance, reconciliation and reconstruction; • create productive employment, boost purchasing power, and give people a stake in reconciliation; and
• restore key imports and essential social services in order to facilitate poverty reduction and private-sector recovery.
The currency auctions The World Bank wishes to ensure the government does not put the credit to have started uses not endorsed by donor countries—it insists that the currency auctions be used for private importers only. The first tranche of US$15m was transferred to Burundi immediately after approval of the credit, and the first auction—of US$3m—was held on July 4th. Bids varied between Bufr837:US$1 and Bufr687:US$1, and the weighted average was Bufr754:US$1, rising to Bufr790:US$1 at the second auction on July 11th. At the third auction, on July 18th, this had fallen to Bufr768:US$1––compared with the official rate of Bufr663:US$1 and a parallel market rate of Bufr1,100:US$1.
There is some evidence that the commercial banks have been colluding during the auctions in order to manipulate the exchange rate. As a result, the Banque de la République du Burundi (BRB; the central bank) will be under pressure to regulate this when it reviews the auction process in August. Some private importers have complained that the banks bidding on their behalf have offered lower prices for US dollars than they had been prepared to pay, and that in some cases they had not received the foreign exchange for which they had been hoping. The banks have also been influenced by Burundi’s dual exchange-rate system, the deuxième guichet, which was introduced earlier in the year at a more attractive rate––Bufr800:US$1––than the official system (1st quarter 2000, page 32). Some of the commercial banks have contractual import obligations at over Bufr800:US$1, because they are classified as falling under the higher of the two exchange rates. These banks stand to lose money if the
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Burundian franc gains value, and they have bid high in order to support the existing exchange rate.
The World Bank had hoped that the increased availability of foreign exchange would lower the parallel market rate, and expected the BRB to increase the official exchange rate so that the two rates could converge. However, despite a slight fall in the parallel rate from Bufr1,350:US$1 to Bufr1,100:US$1 when the World Bank credit was first announced, it has not changed after any of the foreign-exchange auctions. This is partly because of collusion, but is also because importers of luxury goods, who are excluded from access to the credit, still need to buy dollars on the parallel market. In addition, access to the currency auctions requires a level of disclosure that many Burundian traders, after over three years of sanctions, have become indisposed to provide. In the meantime, counterpart funds from the US$6m-worth of auctions have not yet been disbursed for supporting social sector programmes.
Industrial production Government figures indicate that industrial production has been flat in the remains stagnant first quarter of 2000, compared with the same period in 1999, rising by 0.8%. There have been broad variations, however, including increases of 91% and 20% in the chemicals and textiles sectors, respectively, which indicates that the removal of sanctions has had some effect. Milk production and production of some construction materials fell sharply. However, the figures should be treated with some caution owing to persistent weakness in official data, and it is too early to draw clear trends from this.
Burundi: industrial production (selected items), Jan-Mar
1999 2000 % change Beer (hl) 225,474 213,978 4.1 Milk (litres) 78,292 29,221 –62.7 Polythene film (kg) 29,537 56,404 91.0 Soap (kg) 38,151 47,709 25.1 Washing soap (kg) 464,731 739,367 59.1 Metal sheets (units) 27,041 32,558 20.4 PVC tubes (kg) 15,589 4,042 –74.1 Source: Banque de la République du Burundi.
Government revenue Total state revenue rose by 24% in the first quarter of this year in nominal rises terms, compared with the equivalent period in 1999, reaching Bufr20.8bn (US$31.4m) according to data from the central bank. This increase is well above the official level of inflation of 3.5% in 1999, although the fact that independent sources believe that inflation was in fact closer to 20% means that the increase in real terms is probably quite small. Total expenditure rose more slowly, reaching Bufr18.3bn in the same period––a 17% increase––although capital expenditure, which includes debt service in the government’s accounts, more than trebled. According to the BRB’s figures the government’s overall balance improved, more than doubling to Bufr2.6bn. However this figure is somewhat misleading as the government is in fact a substantial net borrower from the domestic banking system, and the fact that it records a surplus can only mean that it has borrowed more than it had immediately meant to spend.
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Nonetheless, there is evidence that the government’s borrowings from the commercial banks are falling. The value of Treasury certificates held by the banks fell from Bufr28bn in November 1999 to Bufr9.8bn in December, and to Bufr6.8bn in March 2000. However, at the same time the government has increased its borrowing from the BRB this year. Total debt owed the BRB was Bufr25bn in 1998—this rose to Bufr41bn in 1999 and to Bufr43b in the first quarter of this year.
Otherwise the state budget is regarded as generally untransparent, and substantial off-budgetary expenditure is being directed through the presidency and for ad hoc emergency spending. In addition, the government appears to be treating loans as receipts in its official figures.
Burundi: government finances, Jan-Mar (Bufr bn) 1999 2000 Total receipts 16.8 20.8 Tax receipts 13.2 16.8 Non-fiscal receipts & grants 3.6 4.0 Total expenditure 15.6 18.3 Recurrent expenditure 13.7 15.4 Capital expenditure & other 1.9 3.9 Balance 1.2 2.6 Source: Banque de la République du Burundi.
Investor withdraws from Andover Resources, an Australian subsidiary of Canadian-listed Argosy a nickel project Minerals, has declared force majeure at the Musongati nickel project it had been studying (2nd quarter 1999, page 25). Burundi’s Hutu rebels have been deliberately targeting the area and Andover has judged conditions too unsafe even to complete its feasibility study. Musongati is a particularly rich section of a substantial nickel site that also contains lesser deposits of cobalt and copper and crosses into north-western Tanzania. South Africa’s Anglo American Corporation is also keen to develop sections of the deposit, should security conditions ever permit it.
The dispute with The legal dispute between the Burundian government and the Belgian Affimet continues businessman and gold trader, Tony Goetz, who succeeded in January in having the accounts of the Burundian embassy in Brussels frozen, has continued (May 2000, page 34). Mr Goetz has claimed that these funds covered only his legal fees, not the debt he believes the Burundian government owes him, and asked that the Belgian assets of the BRB be frozen too. This was done, much to the anger of the Burundian government, which had tried to persuade Belgian judges—unsuccessfully—that BRB assets are not government property. The Burundian government has sent a formal note of protest to the Belgian government about the matter, and has also said that it will go to court to recover a debt from the Belgian government dating back to 1962. It claims that the old colonial social security system, the Office de sécurité sociale d’outre- mer (OSSOM), owes money to its successor, the Institut national de sécurité sociale (INSS). In 1999 the Belgian government proposed that the debt be counted against the assets that OSSOM bequeathed INSS, although now the
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two parties are in dispute over the value of these assets. Another Belgian gold trader, Sylvain Landou, is also attempting to freeze government assets abroad in an attempt to recover a debt from the Burundian government it allegedly incurred in 1962. No verdict has been announced on the matter.
Agriculture
The north-east is hit A substantial drought has been reported in the north-eastern provinces of by drought Kirundo and Muyinga, the second year that the rains have failed in these areas. The worst affected communes are Busoni and Bugabira, next to the border with Rwanda’s Kibungo prefecture, which is also plagued by drought. The UN World Food Programme (WFP) estimates that 350,000 of Kirundo’s 550,000 inhabitants are affected by consequent food shortages. Many inhabitants are reported to have left for neighbouring areas, particularly as the crucial bean crop has almost completely failed. The WFP believes the situation to be serious and will be distributing roughly 35,000 tonnes of food between July and December. Burundi’s minister of agriculture, Salvator Ntihabose, states that Burundi faces a food deficit of 363,000 tonnes this year. This is particularly because of the severe disruptions caused in Bujumbura Rurale by the regroupment programme, which prevented the inhabitants from cultivating effectively (see The political scene).
The tea and coffee harvests The tea harvest in the first three months of 2000 was the highest recorded for exceed expectations years, leading the state marketing board, the Office du thé du Burundi, to believe that its predictions for a 10,000-tonne dry tea harvest will be accurate (1st quarter 2000, page 33). From January to the end of March, 11,900 tonnes were harvested––27% higher than the equivalent period in 1999. The 1999/2000 coffee harvest is also performing well, reaching 29,885 tonnes against the 28,500 tonnes earlier predicted (1st quarter 2000, page 33). The deterioration in quality remains a problem, however, owing to the lack of inputs and the general insecurity preventing farmers from adequately tending their crops. The prospects for next year’s harvest are apparently poor because of adverse growing conditions and the fact that a coffee tree disease is working its way through the Great Lakes region. As a result, the Ministry of Agriculture is forecasting a harvest of only 20,000-25,000 tonnes in 2000/01.
Foreign trade and payments
The government plans for Following the approval of an emergency economic recovery credit by the the resumption of aid World Bank, the government is hoping that other donors will also resume assistance to fund rehabilitation programmes parallel with the peace process (see The political scene). The UN agencies and other multilateral donors in Burundi are preparing to elaborate a contingency plan, should a peace agreement emerge which would address the country’s immediate needs, including an integrated plan covering resettlement. Donors are also preparing to hold a round-table conference to discuss medium-term needs for
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rehabilitation later this year, chaired jointly by the UN Development Programme (UNDP) and the Burundian government. This is proposed to be held within two months of a peace agreement, and will take place either in Brussels or Geneva. In the event an agreement is reached, donors have indicated that they would be willing to fund what may be potentially an extremely large international rehabilitation and reconstruction programme. However the government also hopes that more donors will follow the example of the World Bank and start resuming assistance programmes right away, regardless of progress at Arusha, Tanzania. Belgium and France have long advocated a resumption in bilateral assistance before a peace agreement, although this position is apparently not shared by other EU members, including Britain and Germany. However, Belgium’s minister of foreign affairs, Louis Michel, during a brief visit in early July, indicated that he would attempt to persuade other donors to support an early resumption of assistance.
EU to fund rehabilitation The EU is preparing a large rehabilitation programme with the Burundian government which it unveiled on June 6th. The programme is costed at ¤48m (US$43.6), which is due to come from the 7th European Development Fund. This is part of planned support for which up to ¤87m is available, including Stabilisation of Export Earnings Scheme (Stabex) funds. The EU plans to help stabilise the economy and support rehabilitation through a combination of budgetary and balance of payments support, including a projects fund aimed at revitalising the rural economy. Like most other donors, the EU had until recently limited itself to supporting expanded humanitarian assistance, with further aid dependent upon political conditions—namely the peace process— although it did resume some technical assistance in September 1999.
• In late May France pledged FFr10m (US$1.4m) of bilateral assistance for balance of payments support.
• On June 17th the UNDP approved community projects worth US$1.6m in the provinces of Ngozi, Kirundo and Karuzi.
Debt relief is not in sight The IMF has estimated Burundi’s total external debt at the end of 1999 at US$1.12bn, roughly 20 times annual export earnings. By this criterion Burundi would qualify as a debt-distressed country under the heavily indebted poor countries (HIPC) debt-relief initiative, but access to the programme is still a long way off—it requires a viable peace agreement and a period of positive performance under a poverty reduction and growth facility with the IMF, and neither of these are in place.
The Burundian government stated in May that its policy on foreign debt was to pay only the debt service of those institutions that have remained active in Burundi, primarily the World Bank, the African Development Bank, and the International Agricultural Development Fund. Total debt service this year is estimated at US$46.4m.
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Burundi: foreign debt, 1999 (US$ m unless otherwise indicated) Total debta 1,110.8 Multilateral loans 1,040.8 Bilateral loans 153.9 Others –83.9 Average interest rate (%) 1.3 Average maturity (years) 37.0 Average grace period (years) 8.5 Grant element (%) 70.1
a Excl IMF arrears.
Sources: Burundi authorities; IMF estimates.
EIU Country Report August 2000 © The Economist Intelligence Unit Limited 2000