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AFRICAN DEVELOPMENT BANK GROUP

REPUBLIC OF

Country Strategy Paper 2019-2023 (CSP 2019-2023)

Gabriel NEGATU Director General RDGE Yero BALDEH Director RDTS Management Ferdinand BAKOUP Lead Economist ECCE Stefan MULLER Lead Country Programme RDVP Coordinator Daniel NDOYE Country Manager COBI Marcellin NDONG-NTAH Lead Economist ECCE

Abdoulaye KONATE, Principal Country Economist ECCE Abdoulaye M. TANDINA Country Programme Officer COBI John NDIKUMWAMI Transport Engineer COBI Rakia BEN GHANEM Transport Specialist COBI Mamadou DIOMANDE Financial Management Specialist RDGE Souweye MAIGA Procurement Specialist RDGE Maimouna DIOP LY Health and Social Protection AHHD Drafting Team Specialist Gilberte DOGBEVI-FALY Financial and Operations Analyst RDTS Jean Claude NSABIMANA Social Development Specialist COBI Moussa KONE Principal Energy Specialist RDGE Abdelmajid JEMAI Energy Specialist (Consultant) COBI Hamadi LAM Agricultural Specialist (Consultant) AHAI Cyrille EKOUMOU Environmental Specialist PEGC2 Serge RABIER Gender Specialist AHGC0 Christelle S. HAZOUME Technical Assistance Officer PINS

Toussaint HOUENINVO Principal Country Economist ECCE Tankien DAYO Principal Country Economist ECCE Peer Reviewers Hercule YAMUREMYE Principal Operations Officer COCF

AFRICAN DEVELOPMENT BANK GROUP

REPUBLIC OF BURUNDI

Country Strategy Paper 2019-2023 (CSP 2019-2023)

COUNTRY ECONOMICS DEPARTMENT - ECCE EAST REGIONAL DEVELOPMENT AND BUSINESS DELIVERY OFFICE – RDGE

June 2019

Translated document

TABLE OF CONTENTS

CURRENCY EQUIVALENTS ...... i ABBREVIATIONS AND ACRONYMS ...... ii map OF BURUNDI ...... iii EXECUTIVE SUMMARY ...... iv 1 INTRODUCTION...... 1 2 NATIONAL CONTEXT AND OUTLOOK...... 1

2.1 POLITICAL AND SECURITY CONTEXT ...... 1 2.2 ECONOMIC CONTEXT ...... 2 2.3 SECTOR CONTEXT ...... 6 2.4 SOCIAL CONTEXT AND CROSSCUTTING THEMES ...... 7 3 STRATEGIC OPTIONS, PORTFOLIO PERFORMANCE AND LESSONS ...... 8

3.1 COUNTRY STRATEGY FRAMEWORK ...... 8 3.2 AID COORDINATION AND HARMONISATION ...... 9 3.3 WEAKNESSES AND OPPORTUNITIES...... 10 3.4 COUNTRY PORTFOLIO PERFORMANCE REVIEW ...... 11 3.5 LESSONS FROM THE CSP 2012-2018 COMPLETION REPORT AND THE CPPR 2018 ...... 12 4 BANK GROUP STRATEGY 2019-2023...... 12

4.1 RATIONALE ...... 12 4.2 CSP OBJECTIVES AND STRATEGIC PILLARS ...... 13 4.3 EXPECTED OUTCOMES AND TARGETS ...... 17 4.4 INDICATIVE OPERATIONAL PROGRAMME (IOP) AND KNOWLEDGE MANAGEMENT ...... 16 4.5 CSP FINANCING ...... 18 4.6 CSP MONITORING AND EVALUATION...... 18 4.7 COUNTRY DIALOGUE ...... 18 4.8 RISKS AND MITIGATION MEASURES ...... 18 5 CONCLUSION AND RECOMMENDATIONS ...... 20 6 ANNEXES......

ANNEX 1: CSP OUTCOMES FRAMEWORK ...... I ANNEX 2: INDICATIVE PROGRAMME - LOANS AND NON-LENDING OPERATIONS ...... VIII ANNEX 3: ALIGNMENT OF PIPELINE AND HIGH-5 PROJECTS ...... IX ANNEX 4: TECHNICAL AND FINANCIAL PARTNERS (TFP) INTERVENTION MATRIX ...... X ANNEX 5: MACROECONOMIC INDICATORS ...... XI ANNEX 6: IMPLEMENTATION OF THE CPIP 2018 ...... XII ANNEX 7: KEY PERFORMANCE INDICATORS FOR THE CURRENT PORTFOLIO ...... XV ANNEX 8: ONGOING PORTFOLIO (29 MARCH 2019) ...... XVI ANNEX 9: CPIA RATINGS 2013-2016 ...... XVII ANNEX 10: ANNEX ON THE MACROECONOMIC FRAMEWORK ...... XVIII ANNEX 11: CODE RECOMMENDATIONS ON THE CSP 2012-2018 COMPLETION REPORT ...... XIX ANNEX 12: SUMMARY OF EXCHANGES OF VIEWS WITH STAKEHOLDERS ...... XX ANNEX 13: ALIGNMENT OF DSP PILLARS TO PND 2018-2026 AND THE HIGH 5S ...... XXIII ANNEX 14: FIDUCIARY RISK ASSESSMENT ...... XXIV ANNEX 15: COUNTRY RISK ASSESSMENT ...... XXVIII ANNEX 16: CLIMATE CHANGE AND GREEN GROWTH IN BURUNDI ...... XXXI ANNEX 17 - NON-SOVEREIGN OPERATIONS IN BURUNDI ...... XXXIV ANNEX 18 - 2018 CRFA'S MAIN RESULTS ……………………………………………………………..…………………………………XXXV ANNEX 19 - RISK MITIGATION MEASURES …...... ………………………………………………………………..XXXVI Figures and boxes

Figure 1 – Political Context 2017 ...... 2 Figure 2 - Growth rate of real GDP (%) …………………………………………………………………………...3 Figure 3 - Fiscal balance (% of GDP) …………………………………………………………………………………………………………………. 4 Figure 4 - External current balance (% of GDP) …………………………………………………………………. 5 Figure 5 - Breakdown of Active Portfolio by Sector ...... 11 Figure 6 - Breakdown of Active Portfolio by High 5s...... 11

Box 1 - Country Resilience and Fragility Assessment (CRFA) ...... 8 Box 2 – Pillar 1 and CRFA ...... 14 Box 3 – Pillar 2 and CRFA ...... 13 Box 4 –Selectivity Criteria ...... 17

CURRENCY EQUIVALENTS

FISCAL YEAR 1 July – 30 June

MONETARY EQUIVALENTS OF THE UNIT OF ACCOUNT (April 2019)

Currency = Burundian (BIF) UA 1 = BIF 2,537.77 EUR 1 = BIF 2,053.79 USD 1 = 1,828.03

WEIGHTS AND MEASURES

1 metric tonne = 2,204 pounds 1 kilogramme (kg) = 2.200 pounds 1 metre (m) = 3.28 feet 1 millimetre (mm) = 0.03937 inch 1 kilometre (km) = 0.62 mile 1 hectare (ha) = 2.471 acres

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ABBREVIATIONS AND ACRONYMS ADF African Development Fund BIF BRB Bank of the Republic of Burundi CNARED National Council for the Respect of the Peace and Reconciliation Agreement for Burundi and the Restoration of the Rule of Law CNCA National Aid Coordination Committee CNDD-FDD National Council for the Defence of Democracy - Democracy Defence Forces COBI Burundi Country Office CODE Committee on Operations and Development Effectiveness COMESA Common Market for Eastern and Southern Africa CPIA Country Policy and Institutional Assessment CPPIP Country Portfolio Performance Improvement Plan CPPR Country Portfolio Performance Review CRS CSP Results Monitoring Framework CSP Country Strategy Paper CRFA Country Resilence and Fragility Assessment DSA Debt Sustainability Analysis EAC EC European Commission ECCAS Economic Community of Central African States ECF Extended Credit Facility ECGLC Economic Community of the Great Lakes Countries ECVMB Household Living Conditions Survey FSF Fragile States Facility GBS General Budget Support GDP GPRSF Growth and Poverty Reduction Strategy Framework HDI IDEV Independent Development Evaluation (IDEV) Department of the Bank IMF International Monetary Fund ISTEEBU Institute of Statistics and Economic Studies of Burundi LTA Lake Authority MDGs Millennium Development Goals MFPDE Ministry of Finance and Promotion of Economic Development MTR Mid-Term Review NBI Basin Initiative OECD Organisation for Economic Cooperation and Development PAR Project-at-Risk PCG Partners’ Coordination Group PEFA Public Expenditure and Financial Accountability PND National Development Plan PPP Potentially Problematic Project RDGE Regional Development and Business Delivery Office RISP Regional Integration Strategy Paper TFP Technical and Financial Partners TSF Transition Support Facility UA Unit of Account WDR Development Report

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MAP OF BURUNDI

Administrative Map of Burundi

This map was drawn by the staff of the African Development Bank exclusively for the use of readers of the report to which it is attached. The names used and the shown do not imply on the part of the Bank Group and its members any judgement concerning the legal status of a or any approval or acceptance of its borders.

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EXECUTIVE SUMMARY 1. This report presents a strategy for the Bank Group's intervention in Burundi for the period 2019-2023. This Country Strategy Paper (CSP) is intended to support Burundi in implementing its National Development Plan (PND) 2018-2027, adopted in August 2018. CSP 2019-2023 is based on the combined completion report of CSP 2012-2016, extended in December 2018, and the Country Portfolio Performance Review (CPPR), which was presented to the Committee on Operations and Development Effectiveness (CODE) on 13 May 2019. It takes into account the drivers of the country's fragility to support it towards greater resilience. The CSP is aligned with: (i) the country's strategic vision (PND 2018-2027); (ii) the Bank's High 5s and its Ten- Year Strategy 2013-2022; (iii) the Bank's Strategy for Addressing Fragility and Building Resilience in Africa over the 2014-2019 period; (iv) the Eastern Africa Regional Integration Strategy Paper (RISP) (2018-2022); (v) the Second Climate Change Action Plan of the African Development Bank Group (2016-2020); (vi) the Jobs for Youth in Africa Strategy (2016-2025); and (vii) the Strategy for Agricultural Transformation in Africa (2016-2025). 2. Burundi continues to be marked by situations of fragility resulting from its conflict-ridden socio-political history. It is characterised by a low score on the human development index, weak institutional capacity and various forms of social inequality, an inadequate infrastructure network and high vulnerability to external shocks. These factors, aggravated by the socio-political crisis that the country experienced in 2015, have prevented the country from achieving its full potential, particularly agricultural, mining and hydro- ecological. At the political level, facilitation efforts under the auspices of the East African Community have been ongoing since 2016 through inter-Burundian dialogue sessions. However, these initiatives have not yet resulted in major progress on substantive issues. 3. The crisis has led to a decline in activity in the main productive sectors. Real GDP growth was estimated at -0.2% in 2017, compared with an average of 4.6% between 2010 and 2014. The year 2018 was marked by a slight economic recovery with a real GDP growth rate estimated at 1.4%. Therefore, the country faces many challenges that it must address in order to lay the groundwork for sustained economic growth that creates jobs and helps to improve the people’s living conditions over the long haul. Part of the international community that has condemned violations has decided to suspend direct support to the Government, leading to a reduction in external aid. On the social context, food insecurity continues to be a problem and the phenomenon of poverty seems to be gaining momentum.

4. To address the major challenges that it continues to face, the Government of Burundi in August 2018 prepared a National Development Plan for Burundi for the decade 2018-2027. The aim of the PND was, among others, to generate multiplier and lasting effects on improving economic growth and average per capita income, and to foster poverty reduction, development of human capital, environmental sustainability and social equity. The PND is built on eleven (11) pillars and its Priority Action Plan (PAP) comprises five strategic thrusts, estimated to cost BIF 20,385 billion over the period 2018-2027 (around USD 11.1 billions) 5. As at end-March 2019, the Bank's active portfolio in Burundi comprised 16 public sector operations, totalling about UA 247.56 million. Operations are concentrated in the following sectors: transport (60.6%), energy (32.9%), agriculture (4.8%), multi-sector (1.2%) and social (0.4%). The portfolio performance analysis shows a disbursement rate of around 34.3%, for an overall average age of about three (3.8) years. Some 10% of the national projects portfolio was posted on the dashboard due to the slow rate of procurement and disbursements as at 28 March 2019, compared with 22% of the portfolio as at 31 December 2018. Concerning the multinational portfolio, three of the six projects were posted.

6. Drawing lessons from CSP 2012-2018 implementation and taking into account the Bank's High 5s, Burundi’s National Development Plan (PND) 2018-2027, the country context and consultations with the Government and stakeholders, the proposed strategic objective for CSP 2019-2023 is to support the Government in addressing the drivers of fragility and building resilience in Burundi. Two pillars have been identified to achieve these objectives: (i) support agricultural development and transformation; and (ii)

iv improve transport and energy infrastructure. They have been approved by CODE on 13 May 2019 together with the CSP 2012-2018 Completion Report. The first pillar has three operational objectives: (i) promote agricultural entrepreneurship for young people and women with a view to their empowerment; (ii) support agricultural development hubs and increase private investment for processing; and (iii) build institutional and climate change adaptation capacity. The second pillar has two operational objectives: (i) help close the infrastructure gap in the transport and energy sectors to foster inclusion; and (ii) promote equitable access to basic infrastructure to foster social inclusion. 7. The Bank will strive throughout the implementation of CSP 2019-2023 to: (i) support governance improvement, and climate change and gender mainstreaming in CSP focal sectors - agriculture, transport and energy -; and (iii) promote private sector involvement in these focal sectors.

8. The resources that can be mobilised to finance the 2019-2023 strategy could reach UA 148 million, drawn mainly from ADF-14 and ADF 15: (i) UA 52 million for a performance-based allocation; (ii) UA 43 million under the Transition Support Facility; (iii) UA 39 million that can be mobilised at the regional level; and (iv) UA 14 million in non-sovereign resources. The Bank will also continue its efforts to mobilise co- financing from other technical and financial partners. In particular, it will use the co-financing partnership agreements signed with various partners, and will strive to mobilise other sources of financing, including the Trust Fund, the Global Environment Facility (GEF) Trust Fund, the Global Agriculture and Food Security Programme (GAFSP) Trust Fund and climate funds. An estimated UA 70 million in co-financing is expected to be added to the Bank’s resources.

9. The Bank identified the main risks in the country based on a thorough analysis of the current political and security context, and then identified mitigation measures: the instability of the political situation constitutes a significant risk for CSP implementation. In particular, the security situation could be tested in 2019 and in 2020, in view of the timing of the presidential elections. The Bank will join forces with the authorities and the international community to limit that risk.

10. Burundi has good opportunities to succeed in its strategy to transform its economy by 2027. The reforms envisaged must be supported by dialogue with development actors, including technical and financial partners, with a view to restoring the groundwork for economic growth and improving governance and the business climate. The potential offered by the agriculture and mining sectors and the ongoing investment in agricultural, transport and energy infrastructure would help to diversify sources of growth and improve people’s living conditions. The Bank should continue to provide financial and technical support to Burundi under CSP 2019-2023 to help it achieve that objective. Therefore, the Board of Directors is requested to review and approve the Bank Group's Country Strategy Paper (CSP) 2019-2023 for Burundi.

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1 INTRODUCTION 11. This report lays out a strategy for the Bank Group’s intervention in Burundi for the period 2019-2023. It is presented with a view to supporting Burundi in implementing its National Development Plan (PND) 2018-2027, adopted in August 2018, which calls for development based on further transformation of economic, demographic and social structures. This includes generating multiplier and lasting effects on improvement of economic growth and average per capita income, and fostering the satisfaction of basic needs, poverty reduction, development of human capital, social equity and environmental sustainability, including the promotion of development resilient to the adverse effects of climate change. 12. CSP 2019-2023 is based on the combined completion report of CSP 2012-2016 (extended to December 2018), and the Country Portfolio Performance Review (CPPR), which was presented to the Committee on Operations and Development Effectiveness (CODE) on 13 May 2019. It takes into account the drivers of the country's fragility to support Burundi in enhancing its resilience. The CSP is aligned with: (i) The National Development Plan (PND 2018-2027); (ii) the Bank’s High 5s and its Ten-Year Strategy 2013-2022; (iii) the Bank's Strategy for Addressing Fragility and Building Resilience in Africa over the 2014-2019 period; (iv) the Eastern Africa Regional Integration Strategy Paper (RISP) (2018-2022); (v) the second climate change action plan of the African Development Bank Group (2016-2020); (vi) the Jobs for Youth in Africa strategy (2016-2025); and (vii) the Strategy for Agricultural Transformation in Africa (2016-2025). As the Bank’s main programming tool in Burundi for the period 2019- 2023, the CSP provides an opportunity for the Bank to strengthen its short- and medium-term cooperation with Burundi, support the Government in addressing the drivers of fragility and build resilience in Burundi, through agricultural development and transformation and the improvement of agriculture and infrastructure (energy and transport). 13. In addition to this introduction, this report contains an analysis of the country context (section 2) and the country's strategic thrusts for the period 2018-2027, a presentation of lessons from the 2018 review of the portfolio of Bank-financed projects (section 3), the Bank's strategic thrusts for the period 2019-2023 (section 4) and the recommendations submitted for Board approval (section 5).

2 NATIONAL CONTEXT AND OUTLOOK 2.1 Political and Security Context 14. The political context is marked by challenges related to the episodes of instability that the country has experienced, as indicated by the Country Resilience and Fragility Assessment (CRFA)1 conducted by the Bank on Burundi in 2018. The political environment has gradually stabilised since the socio-political crisis of 2015. However, the political climate remains tense. Efforts to calm the situation must continue in order to consolidate the socio-political dialogue. 15. Progress in the inter-Burundian dialogue initiated under the auspices of the East African Community has been relatively modest. According to the report submitted by the Facilitator2 of inter-burundian dialoge, to the EAC Mediator on 19 November 2018, the various

1 The Country Resilience and Fragility Assessment (CRFA) was designed in 2016 to provide a new quantitative tool in assessing capacities and pressures in regional member countries. It complements the Country Policy and Institutional Assessment (CPIA), with a more holistic focus on resilience and fragility factors, including regional impacts, the environment, policy / governance, and security. Resilience capacities are measured through seven dimensions, namely: policy inclusivity, security, justice, economic and social inclusion, social cohesion and climate and environmental impacts. The exercise was conducted on Burundi in 2018 and the results indicate that the country's capacities in the seven dimensions are not strong enough compared to the relatively high "pressure" noted. 2 The mediation for a way out of crisis was given by the heads of state of the sub-region to the Ugandan President (in June 2015) and former Tanzanian President, Benjamin Mkapa (in March 2016), to relaunch the inter-Burundian dialogue

1 sessions of the inter-Burundian dialogue did not lead to major progress on issues such as the status and implementation of the Arusha Peace and Reconciliation Agreement, the security situation, the political and democratic space, and the state of the economy. While noting the efforts of various stakeholders and the adoption of a roadmap for the organisation of presidential elections in 2020, the authors of the report indicate that players in the dialogue seemed entrenched in their positions. At their February 2019 summit, the EAC Heads of State took note of the report, but postponed the discussion on issues related to the situation in Burundi. However, on the security front, the Security Council issued a statement on 22 August 2018 in which it noted that the security situation in Burundi had improved overall. 16. The issue of human rights in the country is a point of disagreement between the international community and the Government. The CFRA shows that freedom of expression and civil society empowerment are relatively limited in Burundi, as illustrated by its 159th position out of 180 countries on the 2019 Reporters Without Borders (RWB) ranking. On 28 September 2018, based on the report of its Commission of Inquiry on Burundi published on 5 September 2018, the United Nations Human Rights Council condemned “in the strongest terms all acts of violence committed in Burundi by all parties or individuals”. The Government rejected the report. In February 2019, the Government decided to close the United Nations human rights office in Burundi, asserting that the national mechanisms and arrangements were sufficient to uphold human rights. Owing to these developments, certain technical and financial partners have firmed up their position of not providing direct support to Burundi’s budget, opting instead for direct support to communities, in particular through NGOs. It should also be noted that in September 2018, the Government decided to suspend the activities of NGOs in the country for three months, beginning 1 2018, to cause them to come into compliance with the provisions of the law governing NGOs in Burundi and in particular with a provision concerning local staffing quotas. That helped to deepen the disagreements with technical and financial partners. However, by January 2019, more than 80% of the NGOs concerned had resumed their activities, after the government decided that they had complied with its requirements. 17. The holding of presidential elections in 2020 is an important issue in the political context. Although they had expressed their reservations about the revision of the Constitution, international organisations welcomed the President’s decision not to seek another . They welcomed the Government’s acceptance in February 2019 of the request for official recognition of a new opposition party (the National Congress for Freedom). The United Nations has encouraged the Government to continue in this direction in the run-up to the 2020 presidential elections, while urging it to be more inclusive, particularly in the context of the adoption of a Figure 1 – Political context 2017 new electoral code. 18. In terms of democratic governance (see figure 1), Source: AfDB Statistics Department (2018 WEF Data) Burundi is one of the 12 African countries where the situation Score -4.0 (Worst) to 2.5 (Best) deteriorated between 2007 and 2016 (-6.5 points), according to Voice and Ecoute et responsabilité the Mo Ibrahim Index of African Governance (2018), which Accountability shows modest progress between 2016 and 2018 (Burundi rose th rd one spot from the 44 to the 43 position out of 54 countries Rule of LawEtat de droit between 2017 and 2018). According to the Index, Burundi will need to make greater efforts in the areas of security, rule of law, participation and human rights. PoliticalStabilité Stability politique

2.2 Economic Context -2,5 -2,0 -1,5 -1,0 -0,5 0,0 Afrique AfriqueCentral Centrale Africa Burundi 19. Burundi is a small with a limited productive base. The economy is undiversified and is based mainly on agriculture. The country’s export base is quite small and is dominated by primary products (coffee and tea account for about 70% of export revenue). The agricultural sector is dominated by small farms

2 and employs more than 80% of the workforce, the majority of whom are women. Agriculture is dependent on rainfall and climate. Between 1971 and 2015 the country experienced a period of climatic variability that led to a contraction of agricultural production, as well episods of political crisis that seriously affected non-agricultural production. During the years of violent political crises (1972, 1993-1995, 2000 and 2003), economic activity declined in both rural and urban areas and these shocks brought more vulnerability in the country, with the contribution of the primary sector declining over time. Between 2000 and 2006, agriculture accounted for about 45.8% of GDP with, however, growth in the ups and downs. Since 2007, the tertiary sector has been driving the economy following a sharp increase of nearly 20%. In 2018, the primary sector accounted for 40.7% of GDP against 44.58% for the tertiary sector and 14.97% for the secondary sector.

20. Burundi has been badly affected by the 2015 crisis. This has been confirmed by the Country resilience and fragility assessment exercise conducted in Burundi in 2018 (see Box 1). In addition, the Country Policy and Institutional Assessment (CPIA) for 2018 confirms Burundi's weak institutional capacity, with an overall score of 3.1 against 3.2 in 2016. This is noticeable in economic management (fiscal policy and monetary policy), sector policies (the financial sector in particular) and governance. On the contrary, in terms of trade policy and regional integration, progress is encouraging (see Annex 9). Because of political turmoil, real GDP growth had fallen sharply to -0.3% in 2015 from 4.2% in 2014 and 4.5% in 2013 (see Figure 2 – Taux de croissance du PIB réel (%) Figure 2). It has been on the ups and downs 8 since (1.7% in 2016, -0.2 in 2017 and 1.4% in 6 2018). The crisis had led to a decrease in 4 activities in the secondary sector (-18.1% in 2 2015), which could not be offset by the 5.6% 0 rise in the tertiary sector. On the demand side, -2 2011 2012 2013 2014 2015 2016 2017 2018 2019 the deterioration in relations with the Burundi Afrique Centrale Afrique community of technical and financial partners led to a decrease in financial support to the public sector (-41% in 2017 compared to 2014), dragging down public investment (-18% in 2015 and -12% in 2016). The slight economic recovery in 2018, is due to the good coffee and tea production, the recovery in the secondary sector (+7.4%) owing to the good performance of agri-food and manufacturing activities, and a recovery in the tertiary sector (+3.2%). The recovery is expected to continue in 2019 and 2020, albeit only modestly, with projections of 0.4% and 1.2% in 2019 and 2020, respectively, assuming that the political situation does not deteriorate any further with the presidential elections scheduled for 2020. The economic recovery could then be driven by an increase in coffee and tea exports, and a slight uptick in public investment.

21. Budgetary indicators have deteriorated with the crisis, despite increased efforts in domestic resource mobilisation (see Annex 10). Between 2012 and 2015, budgetary policy was marked by real efforts to control public spending in the face of falling domestic revenue and budget support (see figure 3). Unfortunately, the decline in economic activity in 2015 led to a sharp downturn in the value of Government revenue. At the same time, the Government’s FigureFigure 3 4 – – Solde Fiscal budgétaire balance (% (% of du GDP) PIB) response to the deteriorating security situation 0 resulted in a higher-than-expected level of -2 current expenditure. The budget balance -4 actually deteriorated (-7.7% of GDP in 2015 -6 compared to -3.8% in 2014 and -1.8% in 2013). -8 Although the fiscal deficit contracted in 2016 -10 2011 2012 2013 2014 2015 2016 2017 2018 2019 and 2017 thanks to the progresses in improving Burundi Afrique Centrale Afrique domestic resource mobilisation, it remains high (estimated at 6.5% of GDP in 2017 and 8.8% of GDP in 2018). Public finance management is

3 constrained by the sharp decrease in external financing of the budget. Given the continuing uncertainties concerning external financing, the budget deficit is expected to remain at 8.8% of GDP in 2019 and could rise to 10.3% of GDP in 2020. 22. The risk of over-indebtedness remains high. Based on the most recent debt sustainability analysis done by the IMF in March 2015, the risk of over-indebtedness for Burundi remains high. This risk is noticeable through the ratio of the net present value of the external debt to exports estimated at 152% in 2015 compared to the reference of 100%. However, it had decreased compared to 2012 (187%) thanks to the budgetary reforms put in place and the increase in exports observed between 2009-2014. Burundi's public debt represented nearly 50% of GDP in 2016 (including about 17% of external debt) compared to 36% in 2012. The estimates of the of Burundi3 (BRB) indicate an increase in debt in 2017 (nearly 50% of GDP) driven by domestic debt. Between June 2015 and June 2018, the outstanding public debt rose sharply year-on-year by +54%, due to a 79% increase in domestic debt and a +15% jump in external debt. The rise in State debt to the entire banking system alone represented 90% of the stock of domestic debt at the end of December 2018.4 The share of external debt as a percentage of GDP has been declining since 2011 (24% compared to 15.3 in 2017 and 14.9% in 2018) 5. According to the Bank's data (ECST), debt service is estimated at USD 70 million against USD 5 million in 2011. They could exceed USD 100 million by 2020. With regard to the sustainability framework of the Bank, the status of Burundi is "red" in 2019; which reinforces the country's risk of high debt levels. Therefore, all Bank financing under ADF-14 is in the form of grants. 23. The deterioration of public finances since 2015 has affected the Central Bank’s performance, due to the extensive use of statutory advances to finance the budget deficit. Official foreign exchange reserves were down by almost 8% between 2014 and 2018, from 3.5 months in 2014 to 3.2 months in 2018. As a result, the official exchange rate of the currency depreciated by about 15% over the period. In 2018, the Central Bank of Burundi continued to implement the relatively expansionary monetary policy that has prevailed since the onset of the socio-political crisis in 2015. Thus, it has continued to facilitate the refinancing of commercial banks to support productive investments, especially in view of the decline in bank liquidity. The official exchange rate was around BIF 1808 to USD 1 in December 2018, compared to BIF 1617 for the same period in 2015, down 12%. Nevertheless, the parallel market is exerting increasing pressure on the exchange rate: USD 1 for BIF 2710 in October 2018 and USD 1 for BIF 2780 in January 2019. The inflation rate, which exceeded 10% in 2017 (14.6%), fell sharply in 2018 (-2.6%). It could increase in 2019 and 2020 owing especially to the election period. 24. Burundi’s external position remains fragile due to its huge trade deficit and the low level of foreign investment. Between 2011 and 2018, the current account deficit remained Figure 5 – External current balance (% of GDP) above 10% with a record of 14.5% of GDP in 5 2015 (see Figure 4). The country’s export base 0 remains poorly diversified and is built essentially -5 around coffee and tea, which account for more than -10 80% of exports. For their part, imports largely -15 comprise manufactured goods, reflecting -20 weakness of the national industry. In 2016 and 2011 2012 2013 2014 2015 2016 2017 2018 2019 2018, the good performance of coffee exports Burundi Afrique Centrale Afrique combined with a decline in imports of goods and services led to a two-year consecutive reduction in the current account deficit (11.6% of GDP in 2017 and 10.4% of GDP in 2018). This decrease is expected to continue in 2019 with forecasts of 9.4% of GDP.

3 Burundi has no program with the IMF since 2016. The last debt sustainability analysis dates from 2015. 4 Source: Bank of the Republic of Burundi (BRB Central Bank). 5 Source : Bank of the Republic of Burundi (BRB Central Bank).

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25. In terms of regional integration, Burundi has made significant strides towards the establishment of a common market as part of the East African Community (EAC). The measures taken include the establishment of a common external tariff, harmonisation of immigration and labour laws, removal of non-tariff barriers and finalisation of the Protocol on Good Governance. Burundi also signed the Agreement for the Continental Free Trade Area in March 2018. Therefore, the country must tackle the challenge related notably to its landlocked status, in order to take advantage of the opportunities offered by integration in the East African region and the rest of the continent. The country's score on the Africa Visa Openness Index6 (0.113 on a scale of 0 à 1) also requires further efforts on its part to facilitate the movement of people and trade with the outside world. Strengthening the road network (80% of the trade in goods) and developing the transport by lake are a priority for the country (). 26. In terms of overall governance, the situation remains worrying, although progress in public finance management puts the country in the average risk category. Regarding corruption, the 2018 Corruption Perception Index, which measures countries in terms of the least corrupt, ranks Burundi 170th out of 180 countries (compared to 157th in 2017). However, on public finance management, the country has made progress since the 2009 and 2012 PEFAs, and the country risk is deemed average as indicated in the country risk assessment in Annex 15. Although the challenges remain significant, real progress has been achieved in reducing the stock of payment arrears on expenditures, reducing extra-budgetary funding, consolidating accounts into a single State account, predicting cash flow and improving the oversight capacity of the General State Inspectorate. On the fiduciary front, based on the analysis of the legislative and regulatory framework, the institutional framework, procurement practices and the integrity and transparency of the procurement system, the overall risk entailed in the use of this procurement system for Bank-financed projects is deemed substantial (see Annex 14). 27. Overall, the business environment in Burundi has been deteriorating in recent years, despite the progress in facilitating business creation. Between 2012 and 2018, the country slipped 12 spots in the Doing Business ranking7. In the 2019 ranking, Burundi went from 164th place in 2017 to 168th in 2018. In this ranking, the country slipped in several aspects, including getting electricity (lost one spot at 183rd), registering property (lost two spots at 97th), obtaining credit (lost one spot at 177th), trading across borders which lost five spots and enforcing contracts which lost up to eight spots (at 158th). Although the overall rating was unfavourable, there were some positive aspects: (i) in terms of starting a business, Burundi currently ranks 17th, thanks in particular to the reduction in the cost of registering a business; (ii) with regard to dealing with construction permits, the country rose from 168th to 162nd following the improved transparency of building permit processing. 28. Burundi’s private sector is underdeveloped. The private sector is dominated by informal sector micro-enterprises oriented primarily towards the local market. Its development is faced with: (i) poor access to finance ; (ii) a crucial lack of foreign exchange in the country; (iii) poor national transport infrastructure; (iv) the weakness of the energy sector; and (v) difficulty in obtaining certification for agri-food products. The share of private investment in GDP remains low (barely 15%), and is below the average for countries of the East African Community. In terms of competitiveness, the Global Competitiveness Report 2018 ranks Burundi 125th out of 135 countries, with a score of 3.21 over 7, and points out that factors such as market size, access to technology, acquisition of technical skills and development of the financial sector are among the major obstacles to the competitiveness of Burundian businesses. 29. The banking sector is the main component of the financial sector, which also comprises insurance companies, and social welfare institutions. On average, over the past five years, the banking sector (banking and financial institutions) has held 84.4% of total assets, ahead of microfinance institutions and insurance companies which accounted for

6 According to the 2018 report, the country's score is 0.113 on a scale of 0 to 1 (with 1 being the most open country), ranking it 46th out of 54 countries.

7 World Bank Group (2018), Doing Business 5

11.4% and 4.3%, respectively. Banking sector credit to the economy represented 14.7% of GDP in 2017. Credit is concentrated in the trade and equipment sectors, which attract more than 61.1% of the whole. Credit is generally short-term (53.5% of the total). The banking market is dominated by three banks of systemic importance, which share 63.7% of sector assets, 60.7% of the credit portfolio and 66.2% of deposits. The low savings mobilisation capacity explains why only 9% of the deposits are for a two-year period or longer. The lending rate charged by the banks was 15.7% in 2018, compared with a credit rate of nearly 5.5%. As regards the stability of the financial system, the level of non-performing loans was relatively high at 14.5% in 2017, compared with the benchmark of 5%. In 2018, a law was passed aimed at laying the groundwork for the integration of the financial sector within the East African Community (EAC) and enhancing the efficiency and resource mobilisation capacity of the financial sector. The Bank will support the Government in setting up this secondary capital market. 2.3 Sectoral Context 30. Burundi is facing major economic and social development difficulties largely related to poor economic infrastructure. 31. Burundi's agricultural sector is an essential source of growth (40.7% of the GDP in 2018, more than 80% of the workforce and about 70% of export revenue), but it is faced with significant constraints. The constraints are agronomic, technological and institutional. Agronomic constraints relate to: (i) low soil fertility that limits productivity; (ii) low input use; (iii) land fragmentation; (iv) inadequate supervision of the agricultural sector; (v) poor water management, processing and product conservation problems, and low agricultural mechanisation. Technological constraints include: (i) inadequate technological innovations; (ii) insufficient water resource management techniques for irrigation; (iii) insufficient technology for the processing and conservation of agricultural products, and the inadequate rural electrification. Socio-economic constraints comprise: (i) land issues and demographic pressure that make access to land difficult; and (ii) poor access to agricultural credit and inputs. Institutional constraints include: (i) difficulty in carrying out structural reforms and inadequate involvement of the private sector in financing the sector. With respect to agri-food valorisation, processing capacity is limited by various factors, including: lack of power supply, lack of product certification, technical weaknesses relating to processing procedures, and low storage capacity. 32. The energy infrastructure development level is inadequate. The energy access rate is limited (around 58.5% in the city, 1.2% in the rural areas en 2016) due to the inadequate development of energy infrastructure. Transmission and distribution networks are obsolete, with losses (estimated at 32.1% in 2016). Energy production is insufficient, leading to significant load shedding. The peak demand in 2016 was 53 MW for an energy output of 287.4 GWh. The total installed power capacity is 62.85 MW, half of which is thermal diesel. Electricity is still expensive in Burundi at an average rate of USD 0.20/kWh. The main challenges in Burundi's power sector relate to universal access to modern energy services, energy efficiency and sustainable development. 33. The transport sector has gained strength as shown by the steady improvement in the transport composite index of the African Infrastructure Development Index (AIDI)8. Government's efforts in this regard received strong support from the Bank. However, there are still challenges that must be addressed to increase and diversify transport, namely: (i) reducing transport costs, which in Burundi - as in most landlocked African countries- represent between 15 to 20% of import costs (that is, three to four times higher than in most developed countries); and (ii) improving the transportation of people and goods, which is a key challenge for any development in the country as well as in the major cities, including .

Burundi ranks 3rd in the EAC in 2019 and 20th in the continent in the transport composite index of the Africa Infrastructure Development Index (AIDI) 6

2.4 Social Context and Crosscutting Themes 34. Burundi is confronted with significant and persistent drivers of fragility as indicated by the results of the 2018 CFRA. The 2015 crisis severely affected Burundi's economic management and business environment. This situation, coupled with decreased access to public services, does not allow for social autonomy. The high poverty rates among the population and the lack of economic opportunities continue to generate relatively strong pressure against economic and social inclusion. The community labour introduced by the Government is one of the initiatives that could help improve access to basic services through a participatory approach. 35. Overall, the 2018 Country Resilience and Fragility Assessment (CRFA) suggests low capacity and average pressures for Burundi. In all seven aspects of the CRFA, the manifestation of pressure exceeds the country's capacity: (i) the areas of political inclusion, security and justice are characterised by strong pressures (particularly for political inclusion), with weak justice and security capabilities; and (ii) the areas of social cohesion, economic and social inclusion and externalities are characterised by low capacity (especially as regards justice) and low pressures (for economic inclusion and social cohesion). To mitigate the drivers of fragility and build resilience in Burundi, it is imperative: (i) that efforts be pursued in the short term to improve the political and security situation as well as overall country governance; and (ii) that interventions be accelerated and sustained in order to strengthen the country's economic base and create income-generating opportunities for the poorest segments. It is against this backdrop that PND 2018-2027 was developed. The ambition is to consolidate the resilience of Burundi’s economy and address the constraints impeding the transformation of the economy into that of an emerging country. 36. The majority of the Burundian population lives in poverty, especially in Box 1- Country Resilience and Fragility 9 Assessment rural areas . Nearly two out of three Pressure drivers of fragility : (i) Land fragmentation Burundians are unable to meet their basic and land conflicts often generate conflicts with a high food and non-food needs on a daily basis potential for instability; (ii) Youth unemployment (low (data from the ECMVB-2013/2014 youth empowerment rates and lack of a strategy for Household Living Conditions Survey). enabling to them to gain access to employment) is a Estimates from the Burundian Institute of threat to the country's security balance; (iii) Low Statistics and the United Nations indicate institutional capacity resulting in difficulties in that the phenomenon worsened in 2017 with implementing economic policies; (iv) High production the poverty rate reaching almost 66% from costs and low skills of the labour force, lack of 64.6% in 2013. Burundi ranks 185th out of financing and the business environment undermine the 189 countries according to the 201810 edition development of the private sector; (v) regional disparities in the availability of infrastructure create of the UNDP Human Development Index, spatial inequities; (vi) The predominance of with a human development index of 0.404. and low agricultural Food security is a major challenge. In 2016, productivity make it impossible to ensure food Burundi ranked last in the Global Food security; and (vii) Cross- effects (presence of Security Index, with nearly one in two Burundian refugees in neighbouring countries and of households suffering from food insecurity. foreign refugees on Burundian soil) are a constant More than half of children (six out of ten) source of threat to the country’s political stability. were stunted in 2017. Health indicators are also low: (i) life expectancy, which was 57 years in 2014, dropped to 52.6 in 2017; (ii) the 11 under-five mortality rate is 42,5 per 1000 live births;Box 1(iii) – Pillar the 1incidence and Box 2 -of Pressure malaria Drivers is 156.2 of per 1,000 people at risk and that of tuberculosis is 114per 100,000 people;Fragility (iv) HIV prevalence stands at 1.1%. (i) Land fragmentation and land conflicts often generate conflicts with a high potential for instability; 37. Burundi has a high unemployment rate,(ii) Youth particularly unemployment among (low young youth people. empowerment In the strict ILO sense, Burundi has a 79% unemploymentrates rate and lack(ECVMB of a strategy-2013/2014). for enabling However, to them to gainmore access to employment) is a threat to the country's

9 The last ECMVB household living conditions survey was conductedsecurity in 2013/2014 balance; with resu (iii)lts made Low public institutional in 2016. Currently, capacity no further surveys are planned due to lack of funding resulting in difficulties in implementing economic 10 UNDP, Human Development Report 2018 policies; (iv) High production costs and low skills of 11 Childmortality, 2017 the labour force, lack of financing and the business 7environment undermine the development of the private sector; (v) regional disparities in the availability of

infrastructure create spatial inequities; (iv) The predominance of subsistence agriculture and low agricultural productivity make it impossible to ensure food security; and (v) Cross-border effects (presence than 40% of those who claim to be employed are actually underemployment because of the duration of their work. With a rate estimated at 65% in December 2017, youth unemployment is a cause for concern. The phenomenon may be due, among other causes, to the limited development of the private sector, the difficulty faced by young entrepreneurs in gaining access to finance, the poor performance of the education system, the persistent mismatch between skills and labour market needs owing to the lack of an appropriate policy for the development of technical and vocational education. Initiatives in support of job creation for young people (project incubators, setting up young people in livestock and agricultural projects, in particular) have been launched by the authorities in recent years, but are poorly coordinated and inadequate, given the magnitude of the needs. 38. Burundi has made progress in women’s empowerment with the implementation of the National Gender Policy adopted in 2004, but there are still challenges to be addressed. The CFRA notes the improvement achieved with the introduction of quotas for women in the Constitution (at least 30%). That paved the way for women’s entry into the and the , where they make up 42% and 36.4% of the members, respectively, according to the latest estimates of the Inter-Parliamentary Union. However, the quota has not been achieved at the local level and is not applied to technical positions. At the institutional level, the existence of the Ministry of Social Affairs, Human Rights and Gender, which established a National Gender Equality Policy in 2012 with its four-year Action Plan, and the designation of Sector Units in the various ministries, represent a major institutional breakthrough. Despite this progress, gender inequalities remain significant in Burundi. The country is ranked 108th on the . Women’s participation rate in Burundi is high in low-skilled jobs (mostly in agriculture) and in the informal sector. This problem needs to be addressed if economic parity is to become a driver for growth and integration. Access to resources and factors of production, especially land, is one of the main sources of inequality. This situation is difficult to change due, among others, to the law on inheritance and land tenure that is still governed by customary law whereby divorced women, single mothers and widows have no right to property. Women continue to be among the main victims of conflicts, and mechanisms for providing care to victims and fighting sexual and gender-based violence are extremely limited, although provided for by law. 39. The country is increasingly vulnerable to climate change and the degradation of the natural environment (see Annex 17). The 2018 CFRA indicates that Burundi’s policies for the protection and sustainable use of natural resources is relatively weak. The implementation of policies and conventions on climate change is slow. In addition, pressures related to access to food remain relatively high. Climatic events such as El Niño and La Nina continue to have a negative impact on agricultural production and food security. Natural disaster risks are real and when compounded by political and security crises, they become the grounds for population displacements (70% of internal displacements are due to natural disasters). Challenges related to the environment and natural resource management comprise: (i) ; (ii) land conflicts; (iii) conservation of biodiversity; (iv) use of biodegradable material; (v) protection of the waters of the tributaries of Lake Tanganyika; (vi) protection and rational use of land; and (vii) management of chemicals and other wastes. The challenges of climate change include: (i) climate resilience and management capacity; (ii) forest exploitation and protection of natural ecosystems; (iii) greenhouse gas (GHG) mitigation and sequestration capacity; (iv) research/development and technology transfer capacity; (v) gender mainstreaming in the fight against climate change; and (vi) the reliability of weather forecasts. Faced with these challenges, the Government is working to mainstream climate change issues into the development programmes.

3 STRATEGIC OPTIONS, PORTFOLIO PERFORMANCE AND LESSONS 3.1 Country Strategy Framework 40. To address the challenges it continues to face, and as a follow-up to the 2012-2016 Poverty Reduction Strategy, the Government of Burundi in August 2018 prepared a National

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Development Plan for Burundi for the decade 2018-2027 (Burundi PND 2018-2027). The PND is designed to be part of a development approach based on a new drive for the transformation of economic, demographic and social structures. The PND was intended, among others, to generate multiplier and lasting effects to improve economic growth and average per capita income, address the basic needs of the people, reduce poverty, develop human capital, and foster environmental sustainability and social equity. 41. The PND is structured around 11 thematics: (i) modernise agriculture; (ii) increase energy production; (iii) improve knowledge based on technology and expertise; (iv) develop the natural resources sector; (v) diversify and promote a competitive and healthy economy; (vi) create an enabling environment for industrialisation; (vii) develop human capital; (viii) strengthen transport, trade and ICT infrastructure; (ix) promote tourism; (x) public-private partnerships; and (xi) regional integration and international cooperation. Based on the challenges identified at sector level and the community consultations that were held, a Priority Action Plan (PAP) was developed. It identifies five strategic thrusts and puts the total cost of the PND at FBU 20,385 billion (around USD 11.1 billions) over the 2018-2027 period. Thus: (i) 76.6% of the resources will be allocated to the development of growth sectors for the structural transformation of the economy; (ii) 17.6% to human capital; (iii) 2.9% to the environment, climate change and land-use planning; (iv) 2.1% to governance, security and the protection of national sovereignty; and (v) 0.8% to the mobilisation of innovative resources. 42. The challenges facing the Government in the PND implementation include: (i) initiating the development of the main national sector strategies in line with the major objectives set; (ii) adopting measures to mobilise the external financing required for the implementation of programmes; iii) to put in place an adequate mechanism for monitoring/evaluation mechanism of the PND; and iv) not to be challenged and substantially revised in the aftermath of the 2020 presidential elections. Addressing these challenges is extremely important, given the ambitious of the PND economic growth forecasts (an average growth of 10.7% of GDP over the period and a GDP per capita expected to reach USD 810 by 2027, compared with USD 274 in 2017) and considering that these projections are based on ambitiuous assumptions (GDP growth of 10.7% over the period and increase of the GDP per capita from 274$ in 2017 to 810$ en 202712). 3.2 Aid Coordination and Harmonisation 43. The formal mechanism for consultation and dialogue between the Government and the various development partners is barely functional in Burundi. The mechanism comprised: (i) a strategic forum chaired by the Minister of Finance, which was supposed to meet monthly; and (ii) a political forum that was supposed to be held quarterly and chaired by the Second Vice- President of the Republic. The management of the period following the events of 2015 was not conducive to the continuation of dialogue between the Government and the technical and financial partners within the partnership framework defined, even though bilateral dialogue was maintained. Moreover, it is worth noting that a number of Government-headed consultation frameworks are operating, especially in the health sector. In contrast, in the of structural reforms for instance, the deficit in coordination worsened with the January 2016 interruption of the reform programme supported by the IMF Extended Credit Facility (ECF) 13. In 2018, the technical and financial partners relaunched a consultation and internal coordination framework. They set up a mechanism comprising a three-tier coordination framework bringing together: (i) heads of diplomatic missions and heads of agencies; (ii) heads of cooperation; and (iii) sector groups.

12 Data and objectives of the PND. 13 In 2018, the dialogue between the Government and the IMF on the re-engagement in the country was initiated. The Bank attended the technical mission carried out by the Fund's. The discussions are ongoing without a clear visibility on the terms of re-engagement. At this stage, the issue under discussion is the consultations the Article IV the IMF's Status. 9

44. For its part, the Bank is playing an active role in facilitating dialogue and aid coordination mechanisms. It did not suspend its operations in Burundi despite the socio- political crisis of 2015. It assumes the role of leader of TFPs in the transport sector where it is a key player for road financing and regional integration. Moreover, given that the Bank maintains effective dialogue at bilateral level with other partners to address the numerous challenges and mobilise resources for project co-financing, it is well placed to play an advocacy role in the country. As far as financial support is concerned, the Bank is among Burundi’s three main development partners in terms of aid volume (along with the World Bank and the European Union). 3.3 Weaknesses and Opportunities 3.3.1 Challenges and Weaknesses 45. The main challenges are akin to the drivers of fragility (see previous section). The episodes of political instability experienced by Burundi were not conducive to laying the groundwork for sustained economic growth. The major constraints identified as hindering the structural transformation of the economy may be summarised as follows: (i) low agricultural productivity; (ii) high vulnerability to external shocks; (iii) inadequate power supply; (iv) rapid population growth; (v) space management; (vi) insufficient and weak quality of transport infrastructure; (vii) low human capital; (viii) inadequate ICT infrastructure; and (x) failure to mainstream climate change into all social and economic development sectors. 3.3.2 Strengths and Opportunities 46. Despite these constraints, Burundi has several advantages/opportunities which, if properly harnessed, could have a real impact on growth and job creation:  The agricultural sector has considerable advantages: (i) the availability of a hard-working agricultural workforce; (ii) the possibility of having several crop cycles per year, given the rainfall patterns; (iii) the existence of varied ecosystems, allowing for a widely diversified agricultural system (food and cash crops, and the development of plant, animal and fisheries production value chains); (iv) the availability of 120,000 ha of marshland, irrigable plains (Mosso and Imbo), a large network of rivers, and abundant rainfall for at least 6 months a year (which can be enhanced by adopting appropriate irrigation techniques).  The country’s mining potential is huge with significant reserves of minerals such as nickel, , vanadium, phosphate and limestone. Burundi has the world’s second-largest nickel reserve, accounting for 6% of the global reserve estimated at nearly 200 million tonnes. However, all this mining potential remains under-exploited.  Lake Tanganyika offers the country significant opportunities: This lake serves about 10 ports. The development of port activities could make Burundi an inter- regional trade hub. The renovation of the Bujumbura Port will increase trade, especially the transit of goods to and from various countries of the sub-region (, , DRC, , etc.), thereby reducing transport costs,  The exploitable hydropower potential is 1,300 Megawatts: Currently, less than 40 MW are actually exploited.  The country is characterised by up to five ecological zones (the Imbo plain, the Mumirwa western escarpment, the Congo Nile crest, the central plateau and the Moso lowlands (in the east). These ecological zones offer a series of protected areas and biodiversity-rich aquatic environments that could positively affect the development of a healthy natural environment, natural resource conservation and management, and climate change mitigation.

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3.4 Country Portfolio Performance Review 3.4.1 Composition 47. The Bank’s active portfolio in Burundi as at end-March 2019 comprised 16 public sector operations, totalling approximately UA 247.56 million (see Annex 8). The focal sectors of operation are: transport (60.6%), energy (32.9%), agriculture (4.8%), multisector (1.2%), social sector (0.4%). This situation reflects the strategic choices defined by the Bank's assistance strategy for the country for the period 2012-2016, which was extended to 2018, and focused on governance and infrastructure improvement (figures 5 and 6).

Improve Feed Africa, Répartition portefeuille public /secteur the Quality 4,8% Light up 4,8% of Life in and power 1,2% Africa, Africa , 0,4% 20,3% 23,1% 32,9%

60,6% Industrialise Africa; 9,4% Integrate Energy Agriculture Energie Transport AfricaMultisector, 42,4% Social Multisecteur

Figure 5 – Breakdown of the Active Portfolio by Sector Figure 6 - Breakdown of the Active Portfolio by

the High 5s 3.4.2 Analysis of Performance Indicators 48. The portfolio performance analysis shows a relatively satisfactory disbursement rate of around 34.3%, for an overall average age of about three (3.8) years. The decrease in the disbursement rate in 2018 and the first quarter of 2019 was due to the fact that a number of projects, such as PABVARC and two road projects (RN5 and RN13), were closed in 2018, while the portfolio was rejuvenated with the entry of two new projects in November and December 2018 for which funding has yet to be disbursed. 49. As at 29 March 2019, none of the current projects was deemed at risk. However, 10% of the national project portfolio (the Jiji Mulembwe Hydropower Project) appeared on the dashboard due to the slow procurement and disbursements rate as at 28 March 2019, compared with 22% of the portfolio as at 31 December 2018. Concerning the multinational public portfolio, three of the six projects were flagged. These are: (i) BURUNDI-DRC NELSAP Interconnection; (ii) RUSUMO-BURUNDI Regional Project; and (iii) RIZIZI III. These multinational projects mainly comprise energy sector projects characterised by slow implementation and low disbursement rates. In addition to the lack of national capacity in the sector, the multinational nature of these operations call for constant consultation between various stakeholders to ensure progress in implementing the activities programmed. Furthermore, since a number of these operations are implemented under a public-private partnership arrangement, they take more time to design. To improve the monitoring and status of energy sector projects, the Bank's Country Office in Burundi has been strengthened with an energy specialist. Thus, the Bank is giving itself additional resources to support capacity building for the public corporation in charge of energy (REGIDESO). As a result, significant progress has been made, especially with the acceptance of the use of English law by the three countries (Rwanda, DRC and Burundi), which resolves the main point hindering the RIZIZI III Project, and the release of the first disbursement for the Jiji Mulembwe Hydropower Project. 50. The Bank will continue its efforts to consolidate the Burundi portfolio, in light of Presidential Directive No. 02/2015 Concerning the Design, Implementation and Cancellation of Bank Group Sovereign Operations. The dialogue on performance will be strengthened, especially with the implementation of the Country Portfolio Performance Improvement Plan (CPPIP) 2018 (see Annex 6), formally approved by the Government and the Bank. A focus will be put on technical assistance in the energy sector to strengthen skills and mastery of procedures for faster implementation of ongoing programs. Capacity building will also focus on the

11 management of regional operations that are the bulk of the portfolio, and the coordination among states will be improved. 3.5 Lessons from the CSP 2012-2018 Completion Report and the CPPR 2018 51. Although part of the implementation period of CSP 2012-2018 was affected by the political crisis, this strategy enabled the achievement of outcomes aligned with the original objectives14. Lessons from implementing CSP 2012-2018 helped to shape several aspects of CSP 2019-2023.  The need to multiply the sources of CSP funding: Given that ADF and TSF allocations are low compared to the country’s needs, the Bank will continue to mobilise additional sources of financing to leverage resources, especially through the private sector window, trust funds and co-financing;  The need to address fragility issues in order to build the country's resilience: The Bank should better address fragility issues as part of its new assistance strategy with a view to building resilience in Burundi (better integrating the fragility diagnostic in Burundi);  The need to support the development of the private sector in Burundi: Given the magnitude of unemployment, especially among young people and women, the Bank will need to strengthen dialogue with the private sector (identification of ways to support its development);  The need for the Government to focus its efforts on the development and/or updating of national sector policies in order to operationalise and effectively implement the National Development Plan 2018-2027 (the lack of updated sector strategies and frameworks for coordination with technical and financial partners was one of the weaknesses that characterised the CSP implementation); and  The need to integrate lessons from the 2018 portfolio review into the preparation of future Bank operations: These include, for the Bank: (i) ensuring that the project baseline study is of very good quality; (ii) ensuring the mastery of national procedures and those of the Bank by project teams; (iii) building implementation capacity in the energy sector; and (iv) holding regular meetings with the Government to monitor the portfolio improvement action plan.

4 BANK GROUP STRATEGY 2019-2023 4.1 Rationale 52. Despite the progress achieved in stabilising the country since the 2015 crisis, Burundi continues to face huge development challenges. The constraints were presented in the section on the economic context and drivers of fragility. However, there are opportunities and real potential in Burundi that could be leveraged to build the country’s overall resilience. 53. The CSP drew on outcomes and lessons from implementing CSP 2012-2018, the diagnostic of the drivers of fragility and a dialogue and consultation process involving the authorities, civil society, the private sector and development partners. Missions were fielded and dialogue sessions held in November and December 2018 and in May 2019 (the dialogue workshop). The CSP preparation is also based on the conclusions of the mission of the AfDB Executive Directors to Burundi in February 2019 and their discussions with senior officials. Thanks to these consultations, an agreement was reached with stakeholders on the need to strengthen the opening up of the country internally and externally, the need to introduce reforms that would transform the country’s agriculture into one that is market-oriented, and the need to improve the quality and availability of services in the power sector. Discussions also

14 Cf. CSP 2012-2018 Completion Report and the 2018 Portfolio Performance Review considered by CODE on 7 May 2019 12 underscored the importance of developing the private sector to enable it to serve as a driver of inclusive and job-creating growth. Access to finance and technical assistance for the private sector were also identified as support areas to be considered by the Bank (see Annex 12 on consultations). 4.2 CSP Objectives and Strategic Pillars 54. Based on these considerations (analysis of the PND 2018-2027 and the in-depth discussions with the Government and development actors), the Bank’s comparative advantage, the outcomes of the CSP 2012-2018 and CFRA implementation, the proposed strategic thrust of the new CSP for Burundi is to support the Government in addressing drivers of fragility and building resilience in Burundi. This strategic objective is in line with the Bank's Strategy for Addressing Fragility and Building Resilience. CSP 2019-2023 will support measures aimed at removing impediments to the development of the country's potential, in an effort to achieve inclusive growth and build economic resilience, while ensuring the transition to a green economy. It is aligned with the Bank's High 5s and Ten-Year Strategy 2013-2022 4.2.1 Intervention Pillars Proposed for the 2019-2023 Period 55. To achieve this general objective, two complementary and mutually reinforcing pillars are proposed.

56. Pillar 1 relates to agricultural Box 2 – Pillar 1 and CFRA development and transformation. Its objective is to modernize agriculture with a view to diversifying Pillar 1 has been defined in relation to the production and improving the income of rural CRFA to: populations. Under this pillar, the Bank will help to (i) Contribute to the reduction of the improve the living conditions and the resilience of relatively high pressure the country is experiencing due to extreme poverty and rural communities, through an integrated land lack of economic opportunities: increased management approach involving the optimal use of agricultural production, effects on the natural resources adapted to the increasing income of the beneficiary population, job population pressure. The agricultural sector is a creation, etc.; significant driver for poverty reduction and job (ii) Build capacity (currently below average) in economic and social inclusion: creation in Burundi. This pillar is part of the agricultural productivity, industrial “Economic and Social Inclusion” dimension of the processing areas, etc.; and CRFA 2018 because it addresses issues of extreme (iii) Build capacity (currently extremely low) poverty and contributes to capacity building in the in social cohesion while reducing pressure: direction of creating economic opportunities (see land management.

Box 2)

57. This will involve: (i) improving the standard of living of the populations in the targetted zones; (ii) developing the entrepreneurial skil ls of young people and women with a view to their empowerment; (iii) supporting agricultural development hubs (agropoles) and increasing private investment in processing; (iv) developing lands subject to management resilient to climate changes. The Bank will lay special emphasis on supporting the Government in creating an agro-industrial processing area in Burundi aimed at encouraging the establishment of processing plants in areas of high agricultural production (for processing commodities and minimising post-harvest losses). Efforts will also be made to support the development of technical and research capacity in agri-food processing and food fortification through the introduction of a university training course (the establishment of a centre of excellence in nutrition sciences will help to reduce ). Agricultural transformation as part of implementing the Technology for African Agricultural Transformation (TAAT) programme, will target communities that are not only economically, socially and environmentally weak as well as vulnerable to the adverse effects of climate change, but also have agricultural and fish-farming potential that, if sustainably exploited, could help improve food and nutrition security, increase the income of vulnerable small producers and mitigate the impact of poverty on rural households.

13

58. Pillar 2 concerns the improvement of transport and energy infrastructure. It aims to remove the bottlenecks restricting the productive sectors and hindering access to domestic, regional and international markets. It takes into Box 3 – Pillar 2 and CFRA consideration the CRFA’s diagnostic to build Pillar 2 builds on the CRFA to: capacity for economic and social inclusion and social (i) Build capacity (currently below average) cohesion (see Box 3). The transport sector is a in economic and social inclusion: transport, significant driver for strengthening regional energy, internal and external access, integration and trade in East Africa, and the current reduction of input costs; and state of the energy sector is a major constraint to the (ii) Build social cohesion capacity (now reduction of input costs, the processing of primary extremely weak), while reducing pressure: commodities and the achievement of the people’s private sector development, improved access welfare. Therefore, this pillar will: (i) contribute, as a to electricity services. factor of inclusion, to bridging the infrastructure gap in the transport and energy sectors; and (ii) promote equitable access to basic infrastructure. In the transport sector, the Bank will support the development of multimodal transport (roads and ports) to enable Burundi to take advantage of its geographic position. It will continue operations to open up agricultural production areas and create closer links between production areas and outlets (lake transport will be prioritised by rehabilitating the Bujumbura Port). 59. In the energy sector, the Bank will focus on the construction, rehabilitation and/or extension of energy infrastructure as a prerequisite for the sustainable structural transformation of the Burundian economy. Better access to energy services by households and businesses (including in the agricultural and agro-industrial sectors) is a factor in reducing production costs. This will encourage agro-processing and agribusiness. The Bank will continue to strengthen its interventions to facilitate access to energy for the poorest people and resolve structural problems in the energy sector by prioritising green energy and supporting off-grid solutions. It will also focus on capacity building to accelerate the implementation of projects in this sector. The Bank will support private sector involvement for greater participation in sector investments, as well as ensure greater synergy with other development partners for the conduct of joint operations at both the national and regional level. The Bank will strengthen its activities aimed at accelerating regional interconnection projects with a view to establishing a regional electricity market. 4.2.2 Crosscutting Areas 60. To maximise the impact of implementing these two pillars, the Bank will strive throughout the implementation of CSP 2019-2023 to: (i) support the improvement of governance and build capacity; (ii) mainstream climate change and gender in CSP focal sectors; and (iii) promote private sector involvement in these focal sectors (see Annex 17). 61. In terms of capacity building, the Bank’s action will be at the macroeconomic and institutional levels and in the key sectors of the national program, taking into account the challenges noted above. Actions and areas of focus will include public financial management, especially internal and external resource mobilization, debt analysis and public policy management, financial sector regulation, etc. The Bank will foster knowledge exchange among peers though high-level seminars, training coupled with internships enabling beneficiaries to develop the necessary skills than can be transferred to others The capacities for diagnosis, development and implementation of policies and reforms will be strengthened at the central and decentralized levels (provision of tools, knowledge and good practices for real transformation).Stakeholder capacity building for participation in regional operations is also critical, given that regional energy projects require coordination with several countries in key areas. Bank operations will include technical assistance to address the challenges of low human capital in Burundi. In the energy sector, for instance, the Bank's technical assistance will help to identify current skills gaps, develop appropriate training programmes, and provide the skills needed to grow the sector. It will support capacity-building initiatives for actors through hands- on training programmes for technicians, on-the-job training for engineers, and training and

14 certification programmes for electricians. The Bank will also explore opportunities for capacity building in the mining sector, including through the Bank’s Natural Resources. 62. Private sector developmentand job creation. Under Pillar 1, the Bank will support agricultural entrepreneurship particularly by strengthening human capital for all segments of agricultural value chains and providing support funds for agricultural initiatives. Under Pillar 2, and particularly with regard to energy, the Bank will focus on strengthening the electricity value chain and technical assistance activities that can forge ties with local SMEs for the construction and maintenance of facilities that require semi-skilled and unskilled labour. Three areas of intervention will be prioritised, given their income-generating and job-creation potential: (i) rehabilitation of the existing network and production facilities; (ii) extension of the transmission and distribution network to increase electricity access for businesses and individuals in under-served areas of the country; and (iii) support for off-grid development (rural electrification) to help private sector enterprises to invest in technologies that would reduce their reliance on the domestic power supply. The Bank will also consider the possibility of providing the African Legal Support Facility with technical and financial assistance in connection with the conclusion of PPP contracts, particularly in the energy and mining sectors. 63. Governance: The successful implementation of development programmes hinges on the stabilisation of the overall macroeconomic framework. Unfortunately, it was not possible to consolidate the progress achieved in this area between 2012 and 2014 because of the 2015 crisis. Thus, in general terms and in the absence of budget support operations, the Bank will provide targeted institutional support required to strengthen the public financial management institutional framework, and particularly mobilise and secure domestic fiscal revenue. The improvement of sector governance will be included in the two pillars: energy sector management, streamlining public spending in the three focal sectors, results-based management (implementation of medium-term programming tools for financing the agriculture, energy and transport sectors); (ii) advisory support informed by policy briefs aimed at improving economic governance and (iii) support for reforms aimed at improving the overall business environment. 64. Gender: Gender mainstreaming will remain a priority in all Bank operations. High female representation will be ensured in: (i) the selection of beneficiaries of agricultural projects such as members of agricultural groups and cooperatives, (ii) the recruitment for jobs on road/port and energy projects; and (iii) the selection of beneficiaries of private sector support funding.

15

4.2.3 Selectivity Box 4 – Selectivity Criteria

65. The strategic thrusts take into The definition of the intervention pillars of the new account the need to generate the greatest CSP was based on various selectivity criteria, including: possible impact through the interventions. Alignment: The need for interventions to be aligned Therefore, the Bank worked with the with both the country's development priorities (PND Government during the consultations to and sector strategies) and the Bank's priorities; remain within limited areas of intervention, in Available and mobilisable resources: Consideration the spirit of complementarity with other of country resource allocations (performance-based allocations, TSF), trust funds, resources meant for technical and financial partners, all with a the private sector, possibilities of co-financing with view to having a real impact. other partners; Complementarity: The need not to duplicate existing 4.2.4 Alignment interventions (which are funded either by other 66. The proposed pillars are aligned partners or by the Government) and to maximise the with the Bank's High 5s, namely "Light up and impact of past or ongoing interventions; The Bank’s comparative advantage: The need to rely Power Africa", "Integrate Africa", "Feed on the resources and expertise of the Bank in the Africa", "Industrialise Africa", and "Improve choice of areas of intervention, based on its the quality of life for the people of Africa" experience at the continental level and its recognised "(See Annex 13). They are in line with the positioning in Burundi; Bank's East Africa Regional Integration Impact of interventions: The need to take resource availability into account when deciding the number Strategy for 2018-2023, and the Strategy for and size of operations to maximise their impact. Addressing Fragility and Building Resilience for the 2015-2019 period. They are also aligned with the Jobs for Youth in Africa Strategy (2016-2025) and the Strategy for Agricultural Transformation in Africa (2016-2025). Moreover, the pillars are based on the vision laid out in the country's National Development Plan. 4.2.5 Complementarity with other PTFs 67. The Bank's interventions will continue to be complementary with those of other TFPs through periodic consultations and discussions at various stages of the Bank's project cycle. The PTF intervention matrix in Annex 4 reflects good division of labour and coverage of all sectors. Therefore, the Bank's operations complement those of TFPs in other resilience-building areas, where the partners do not have comparative advantage, particularly in the areas of political governance, justice and security. The Bank will continue to play a leading role in donor coordination, especially as concerns infrastructure development and the strengthening of regional integration, and to support the revival of the framework for dialogue between the Government and TFPs. 4.3 Expected Outcomes and Targets 68. The main CSP outcomes and targets are developed according to the two pillars, and will be achieved through new operations as well as those already in progress. Annex 1 presents the expected outputs and outcomes of each pillar. 4.3.1 Pillar I: Support Agricultural Development and Transformation 69. The objective of this pillar in this pillar is to modernize agriculture with a view to diversifying production and improving the incomes of rural populations. This will reduce inequalities and mitigate the factors of fragility through improved income (rural populations, young people and women in particular). 70. Regarding the improvement of the standard of living of the populations, the targeted results include: (i) the reduction of the poverty rate from 61% to 55% by 2023; (ii) the increase of the productivity of and by 1 to 2.5 t / ha and 4.5 to 12 / ha and (iii) the reduction of the rate of chronic malnutrition from 55% to 40%. As part of the promotion of agricultural entrepreneurship of young people and women, the interventions aim to create 5,000 jobs,

16 including 4,000 directly in the agricultural sector. Concerning the development of agricultural hubs and the increasing of private investments in processing, the targeted results are: (i) the transformation of the agricultural sector through the structuring of agricultural hubs to enable them to serve as industrial plantations with surplus that can be used by the agri-food industry; and; (ii) attracting private investment trough capacity building for stakeholders to boost their ability to attract private investors and negotiate concessions and Public Private Partenerships (PPP) contracts. Regarding institutional capacity building and adaptation to climate change, it is expected, among others: (i) the management of 60,000 ha of land resilient to climate change; (ii) the improvement of climate forecasts for rapid alert; (iii) popularization of improved techniques for wood utilization and renewable energies. 4.3.2 Pillar 2: Improvement of Transport and Energy Infrastructure 71. The objective of this pillar is to remove the bottlenecks restricting the productive sectors and hindering access to domestic, regional and international markets. 72. With respect to support for the development of multimodal , the expected outcomes comprise: (i) increasing in regional trade from 26% to 35%; improving trade between the South, Southeast and the rest of the country; (ii) positionning Burundi at the center of regional trade between South, North and East Africa; (iii) increasing trade between two fertile agricultural areas (eastern Burundi and western Tanzania); (iv) easing of the traffic between the centre of the country and the Mosso agricultural production areas to the south and the east; (v) lowering the transportation and supply costs for the country's sugar company; (vi) improving access to tourist sites in Rutana (Karera Falls, Germans Cliffs) and Burundi provinces (Source of the Nile); (iv) to lower the costs of evacuation and supply of the country's sugar company,; (v) improve accessibility to tourist areas in the Rutana (Kareraa Falls, Germans' Rift) and Burundi (Nile Source) provinces; and (vi) improving access to the Musonganti (nickel, iron, , and ) and Mukanda (vanadium) mining areas. 73. In an effort to help address the structural problems in the energy sector and increase access to energy for the poorest, the Bank will accelerate the implementation of major ongoing energy sector projects in its portfolio, in line with the new Energy Partnership for Africa, comprising: the Burundi-Rwanda Power Grid Interconnection Project that is being implemented as part of the Nile Equatorial Lakes Subsidiary Action Programme (NELSAP), the Jiji and Mulembwe Hydropower Plant Development Project, the Regional Rusumo Falls Hydropower Project, and the Ruzizi III Regional Hydropower Plant Project. The outcomes expected by 2023 are: (i) improving of the electricity coverage rate from 10% to 14.9%; (ii) increasing the energy production by 74.7 MW; and (iii) decreasing the electricity cost (generation and transmission) from USD 0.20 to USD 0.10. 4.4 Indicative Operational Programme (IOP) and Knowledge Management 74. The Bank's indicative operational programme (IOP) for CSP 2019-2023 (see Annex 2) was guided by consultations with the Government and other stakeholders based on: (i) activities that are required to address the drivers of fragility and build the resilience; and (ii) available and mobilisable resources. Ten (10) operations are planned for the 2019-2023 period: (i) three operations will focus on supporting agricultural transformation; (ii) three will be implemented in the energy sector; and (iii) three will enable the improvement of the transport sector. In addition to being considered under both pillars, crosscutting themes such as governance, capacity building and gender will be supported by operations funded mainly from TSF Pillar III. 75. Non-lending activities will focus on providing strategic advice to ensure complementarity with the lending programme, thereby strengthening the Bank's position as a knowledge-generating and development institution. These activities will include: (i) the preparation of policy briefs intended to inform dialogue with and support the Government in taking concrete policy action in the focus areas; and (ii) the conduct of economic and sector work aimed at deepening the Bank's knowledge of the country and throwing more light on investment operations envisaged in the provisional operational programme.

17

4.5 CSP Financing 76. The mobilisable resources for financing the 2019-2023 strategy could reach UA 148 million, drawn mainly from ADF-14 and ADF-15: (i) UA 52 million for a performance-based allocation; (ii) UA 43 million under the Transition Support Facility; (iii) UA 39 million mobilisable at the regional level; and (iv) UA 14 million in non-sovereign resources. The Bank will also continue its efforts to mobilise co-financing from other technical and financial partners (estimated at about UA 70 million). It will use the co-financing partnership agreements signed with various partners such as the European Union, the World Bank, the Japan International Cooperation Agency (JICA) and the International Fund for Agricultural Development (IFAD), and will strive to seek funding from other sources, including the Nigeria Trust Fund, the Global Environment Facility (GEF) Trust Fund, the Global Agriculture and Food Security Programme (GAFSP) Trust Fund and climate funds. 4.6 CSP Monitoring and Evaluation 77. The results-based logical framework will serve as a basis for the monitoring and evaluation of outcomes. It is based on the PND national monitoring system. Annual portfolio performance reviews (APPRs) will be used to assess the progress achieved in implementing the operations. A mid-term review will be conducted in 2021 to assess progress towards achieving the CSP outcomes, and to propose necessary adjustments. The completion report will be prepared at the end of the strategy period in 2023. Burundi's statistical system contains inadequacies as regards the indicators needed to monitor key sectors of the PND and the High 5s. Support will be provided to build its capacity (update of the National Statistics Development Strategy). 4.7 Country Dialogue 78. The Bank's physical presence through the strengthening of the team at the Burundi Country Office (COBI) will facilitate permanent effective dialogue and close portfolio monitoring. The country dialogue will focus on: (i) mitigating drivers of fragility and building the country's resilience; (ii) developing the private sector as a driver of growth and factor for alleviating unemployment; (iii) mobilising domestic resources and external assistance, notably through improved dialogue with TFPs; (iv) regional integration; (v) women's empowerment; and (vi) youth employment, which will be a key focus. While remaining within its remit, the Bank may consider the use of Pillar 3 of the Transition15 Support Facility for initiatives that are part of the strengthening of the social and political dialogue. The dissemination of CRFA could also be an additional tool for analyzing and diagnosing the context, in particular socio-political. At the operational level, the dialogue will focus mainly on issues related to project implementation and portfolio quality improvement, in line with the principles set out in Presidential Directive 02/2015. To ensure the success of this dialogue, the strengthening of the Burundi Country Office should continue with the recruitment of sector experts and assistants for project implementation. 4.8 Risks and Mitigation Measures 79. The Bank identified the main risks in the country based on a thorough analysis of the current political and security context, and identified mitigation measures (See Annex 19). The instability of the political situation constitutes a significant risk for implementing the CSP. In particular, the security situation could be tested in 2019 and in 2020, in view of the timing of the presidential elections. The Bank will join forces with the authorities and the international community to limit that risk. However, in accordance with its policy, the Bank will have to reconsider the terms and conditions of its intervention in the country in the event of a significant deterioration of the security situation. Given the planning of presidential elections in 2020, the

15 The Bank has in prospect to support a stronger involvement of the diaspora in the country's development and youth employment (jointly with the IOM), 18 mid-term review of the DSP scheduled for 2021 will be the main tool to make any adjustments that may be necessary due to the implications of the results of the presidential elections (changes in priorities in particular)

5 CONCLUSION AND RECOMMENDATIONS 80. Burundi has real opportunities to succeed in its strategy to transform its economy by 2027. The reforms envisaged must be supported by dialogue with development actors, with a view to restoring the groundwork for economic growth and improving governance and the business climate. Continued investment in agricultural, transport and energy infrastructure would help to diversify sources of growth, build the country’s resilience and improve the people's livelihoods. The collaboration between the Bank and Burundi was fruitful during the CSP 2012-2018 implementation period. The Bank's strategy for 2019-2023 is aligned with the Government's key strategic and operational priorities. 81. Recommendations: In view of the foregoing, the Bank's Boards of Directors are requested to consider and approve the AfDB Group’s Country Strategy Paper (CSP) 2019-2023, the strategic pillars of which are: (i) agricultural development and transformation; and (ii) improvement of transport and energy infrastructure.

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Annex 1: CSP Resuls Framework

Country Obstacles to Final Indicators (end-2023) Midterm Indicators (end-2021) African Development Development Achieving the Bank Group Objectives (PND) Country’s Final Outcomes Final Outputs Midterm Outcomes Midterm Outputs Interventions over the Development CSP Period Pillar 1 - Agricultural Development and Transformation Support Improve the living Low agricultural Increased average 100 agri-food Increased average 40 agri-food Project to Intensify standards of the product production, productivity of rice and processing units productivity of rice and processing units Agricultural project area population storage and processing sorghum (T/ha <2 and established and sorghum (T/ha <2 and established and Production and Reduce capacity 0.8 to <10 and 2) supported 0.8 to <5 and 1.2) supported Vulnerability in Increased average 10 stores and Increased average 5 stores and Burundi productivity of maize warehouses productivity of maize warehouses Bugesera Region and cassava T/ha (<1 constructed and cassava T/ha (<1 constructed Agricultural and 4.5 to <2.5 and 12) and 4.5 to <1.5 and 7) Transformation 1,000,000 producers 400,000 producers with Support Project with access to access to improved improved advice, advice, technologies technologies and seeds and seeds Agricultural land area Agricultural land area with water with water infrastructure (2,500 infrastructure (1000 ha) ha) Increased average 30 km of post harvest Increased average 13 km of post-harvest production of market tracks built production of market tracks built garden crops T/Ha (<2 garden crops T/Ha (<2 to 10) to 10) Low income of the Reduction of the 6,777 jobs created in Reduction of the 3,000 jobs created in All interventions in the project area population poverty rate from 61% the sectors (40% poverty rate from 61% the sectors (40% agricultural, transport, to 55% in the project women) to 58% in the project women) energy and private area area sector development Increase in Increase in revenue/year and per revenue/year and per market vegetable farm market vegetable farm M/W (90,000/171,000 M/W (90,000/171,000 to to 100,000/350,000) 1,905,000/2,175,000)

I

Low competence in Reduction of the 100 Master's degrees in Reduction of the 50 Master's degrees in Centre of Excellence in malnutrition chronic malnutrition nutrition and food chronic malnutrition nutrition and food Nutrition Project management and food rate from 55% to 40% security rate from 55% to 50% security diversification Increase by 30% of Increase by 15% of FOSA staff trained in FOSA staff trained in nutrition nutrition 40 agri-food businesses 20 agri-food businesses that have adopted adopt quality standards quality standards High level of Reduction of food 1,500 vulnerable Reduction of food 500 vulnerable Project to Intensify household insecurity from 12% to households benefiting insecurity from 12% to households benefit Agricultural vulnerability in project 5% in the project area from social security 11% in the project area from social security Production and Reduce areas support support Vulnerability in 7,000 vulnerable 2000 vulnerable Burundi households benefit households benefit Bugesera Region from agricultural from agricultural Agricultural inputs in the project inputs in the project Transformation area area Support Project 50 women's FOs 20 Women's FOs reinforced in reinforced in processing processing Promote the Entrepreneurial skills Certification according BBIN upgrade for Certification according BBIN upgrade for Centre of Excellence in agricultural development and to defined norms and product certification to defined norms and product certification Nutrition Project entrepreneurship of product certification standards of 20% of standards of 5% of Youth and Women young people and food processing food processing Entrepreneurship women with a view to products products Support Project their empowerment

Certification of Skills of 40 Certification of Skills of 20 products from food certification experts products from food certification experts processing enhanced processing reinforced 50 Master's degrees in 15 Master's degrees in food technology food technology

Cretaion of 5,000 jobs 1,000 youths trained to Creation of 2,000 jobs 100 youths trained to (including 4,000 in the improve the in (1,500 in the improve the agricultural sector and employability of young agricultural sector and employability of young 1,000 in other trades) people (40% women) 500 in other trades) people (40% women)

II

300 young 100 young entrepreneurs benefit entrepreneurs benefit from activity launch from activity launch kits (40% women) kits (40% women) Support agricultural Identification and Identification of 3 One (1) feasibility development poles and technical assistance for agricultural study for the the improvement of feasibility studies on development hubs establishment of the the input supply the establishment of three agricultural system. agricultural hubs development hubs Contribution to better Increased growth of Resilient climate Resilient climate Project to Intensify mainstreaming of the country's management applied management applied Agricultural climate change vulnerability to for 60,000 ha of land for 30,000 ha of land Production and Reduce climate change Vulnerability in Burundi Bugesera Region Agricultural Transformation Support Project Pillar 2 - Improvement of Transport and Energy Infrastructure. Improvement of the Over-pricing of goods Increase in inter- Rehabilitation of NS NS Multinational Project movement of goods and factors of regional trade from Bujumbura ports for the Rehabilitation and services by land production 26% to 35% (Burundi) at 100% of Bujumbura and (port and road) Decrease of Rehabilitation of NS NS Ports transportation costs by Bujumbura ports 40% -25% (Burundi) at 100% Improvement of living Rehabilitation of NS NS conditions of the urban Bujumbura ports population of (Burundi) at 100% Bujumbura Municipality (poverty rate from 25% -20%) Increased income for Grouping of traders NS NS informal traders around into cooperatives or the port by 20% women's associations

III

Contribution to Improvement of Burundi-Tanzania Multinational Burundi- RN3 Rumonge-Gitaza Cankuzo-Gahuma (RN providing internal and regional integration Cankuzo-Gahuma (RN Tanzania: Cankuzo- and Bujumbura City 13 phase III) / external access 13 phase III) / Gahuma (RN 13 Phase Bypass (80%) Murusagamba- Murusagamba - III) / Murusagamba- Nyakahura and RN3- Nyakahura Nyakahura Road Rumonge-Gitaza Road Multinational Road Development and Development and asphalted -RN3 Asphalting Project Asphalting Project Rumonge-Gitaza and Bujumbura City Bypass Improvement of trade Rehabilitation of the between the South- -Rutana- South-eastern regions Bukemba Road (RN and the rest of the 18) at 50% country (SOSUMO and agricultural products) Reduction of the travel time in the project area

Improvement of the The Gitega -Rutana- Rehabilitation of the The Gitega -Rutana- Gitega -Rutana- access to socio- Bukemba Road (RN Gitega -Rutana- Bukemba Road Bukemba Road economic 18) rehabilitated Bukemba Road (RN rehabilitated (RN 18) Rehabilitation Project infrastructure 18) at 50% at 50% (RN 18) Contribute to bridging Low access to Improvement of Additional number of Improvement of Additional number of Burundi and Rwanda the infrastructure gap electricity electricity access rate, connections to the electricity access rate connections to the power Grids in the energy sector from 10 to 14.9% power grid (273,844) from 10 to 12.7% power grid (119,275) Interconnection Project Energy production is Increase of the energy 3 hydropower plants Increase of the energy One (1) hydropower under NELSAP: in deficit production by 74.7 built production by 26.7 plant built Financing: ADF = MW MW UAM 2.51; TAF = Old or non-existent Electrical installations Electrical installations UAM 3.17; EU = electrical installations built built EURM 15 Additional HT line Additional HT line (239.2 km) (160 km) - Jiji and Mulembwe Additional MV line (10 Additional MV line (0 Hydropower Project. km) km) - Rusumo Falls Additional LV line Additional LV line (0 Regional Hydropower (207.7 km) km) Project - Transmission

IV

High price of Reducction of the cost 3 hydropower plants Reducction of the cost 3 hydropower plants line component. - electricity of electricity from built of electricity from built Ruzizi III Regional USD 20 to 14 cents USD 20 to 19 cents Hydropower Project. - NELSAP Burundi- DRC Interconnection

New projects: - Energy Access Programme Phase I.. - Energy Access Programme Phase II. Crosscutting Areas Promote private sector Weak regulatory Establishment of a Resource Mobilisation involvement in these framework and regulatory framework and Business Climate focal sectors incentives for private to encourage private Improvement Support sector involvement sector investment in Project the energy and agriculture sectors Support the Support the development of the development of the export promotion export promotion strategy strategy Traning of 10 officers Training of 10 IPA in PPP officers in monitoring/evaluation and investor support Contribution to better Increased growth of Resilient climate Resilient climate Project to Intensify mainstreaming of the country's management applied management applied Agricultural climate change vulnerability to for 60,000 ha of land for 30,000 ha of land Production and Reduce climate change Developpment of Developpment of Vulnerability in 30/20 ha of hilly pilot 30/20 ha of hilly pilot Burundi area for M/W area for M/W Bugesera Region Agricultural Transformation Support Project Reduction of gender Improved Girls constitute 40% of Girls constitute 30% of Project to Intensify inequalities employability of girls young people trained in youth trained in Agricultural industrial technologies industrial technologies Production and Reduce and entrepreneurship and entrepreneurship

V

Girls constitute 50% of Girls constitute 50% of Vulnerability in young engineers young engineers Burundi integrated in the road integrated in the road Bugesera Region and port works control and port works control Agricultural and supervision and supervision Transformation missions missions Support Project Girls constitute 40% of Girls constitute 40% of Youth and Women youths given micro- young people who Entrepreneurship enterprise start up kits have received micro- Support Project enterprise start up kits Project to Reduce Youth Unemployment through Capacity Building and Diaspora Engagement Support governance Decrease in the tax Increase in the tax Operationalisation of Increase in the tax 15 officers trained in Burundian Revenue enhancement in the burden burden rate from the standardised burden rate from specialised audits, 10 Agency Capacity CSP focal sectors - 13.7% to 15% invoice 13.7% to 14.2% in tax tools and Building Support agriculture, transport 30 officers trained in regulations, 80 in Project - Resource and energy specialised audits, 15 customs regulatory Mobilisation and in tax tools and tools, 15 in inquiry and Business Climate regulations, 150 in investigation Improvement Support customs regulatory techniques Project tools, 30 in inquiry and investigation techniques Ineffective public Improvement of the 2 public expenditure Improvement of the One (1) public expenditure and weak public expenditure reviews in the energy public expenditure expenditure review in policy planning, effectiveness sector effectiveness the energy sector programming and 2 public expenditure One (1) public monitoring/evaluation reviews in the transport expenditure review in skills especially in the sector the transport sector focal sectors 2 public expenditure One (1) public reviews in the expenditure review in agriculture sector the agriculture sector

VI

Adoption of the 3 sector strategies Operationalisation of Document to support Resource Mobilisation Performance developed the PND operationalisation of and Business Climate management the PND in the three Improvement Support focal sectors available Project

- Development 2 monitoring and 30 BSE officers trained Strategy Preparation evaluation mechanisms in monitoring and Support Project available evaluation

30 BSE officers trained in monitoring and evaluation

VII

Annex 2: Indicative Programme Indicative Operational Programme – Grants (UA Million)

Year Projects Bank Source Co-financing Financing Pillar 1: Agricultural Development and Transformation Support 2019 Centre of Excellence in Nutrition Project 6 TAF

2019 Project to Intensify Agricultural Production and Reduce 7 ADF IFAD (USDM 20) Vulnerability 2020 Project to Support the Promotion of Youth and Women’s 15 ADF Entrepreneurship and Micro-enterprises Pillar II: Improvement of Transport and Energy Infrastructure 2019 Rehabilitation of Bujumbura (Burundi) and Mpulungu 15 TAF grant (UAM 6) EU (EURM 12) (Zambia) Ports +RO (UAM 9) JICA (USDM 28) 2020 Kirasa hydropower plant project 14 Non-sovereign loan Sponsor Kira and commercial banks

2021 Energy Access Programme - Phase I. 10 TAF GEF (UAM 3)

2021 Multinational Burundi-Tanzania: Cankuzo-Gahuma (RN 13 50 ADF grant (UAM 5) Phase III) / Murusagamba-Nyakahura Road Development +RO (UAM 30) and Asphalting Project

2022 Gitega -Rutana-Bukemba Road (RN 18) Rehabilitation 15 ADF Co-financing UAM 25 2023 Energy Access Programme - Phase II. 15 TAF Crosscutting domains 2019 Support project on improving resource mobilisation and 1 TAF business climate Analytical work 2019 2020 2021 2022 2023 Policy Lifting of Financing of the Paper constraints on National the private Development sector in Plan 2018-2027 Burundi The issue of Transformation road of the maintenance in agriculture Burundi sector: towards the establishment of agropoles Strategic Performance Strategic planning in the management in planning in the transport sector the transport, transport sector energy and agriculture sectors Economic Economic Multimodal Public Public Public and sector report on transport and expenditure expenditure expenditure work Burundi (with trade facilitation review in the review in the review in the focus on the agriculture transport sector energy sector energy, sector transport and agriculture sectors)

VIII

Annex 3: Alignment of Pipeline and High-5 Projects

Centre of Excellence in Nutrition Project Kirasa Hydropower Plant Project

Light up Africa Resource Mobilisation and Business Climate Improvement Improve the Quality of Life Support Project for the People Scaling Up Energy Access 1 - On-grid and Off-grid of Africa

Project to Support the Promotion of Youth and Women’s Multinational Burundi-Tanzania: Cankuzo-Gahuma (RN Entrepreneurship and Micro-enterprises 13 Phase III) / Murusagamba-Nyakahura Road Development and Asphalting Project

Integrate Africa Rehabilitation of the Gitega -Rutana-Bukemba Road (RN 18) Feed Africa

Rehabilitation of Bujumbura (Burundi) and Mpulungu (Zambia) Ports Electricity Access Scale-Up: Programme III

Integrate Africa Light up and Power Africa

IX

Annex 4: Technical and Financial Partners (TFP) Intervention Matrix

Agriculture, Education Environment Livestock, Private and Water and Local Institutional Public - Risk of Health Nutrition Fisheries, Land Issues Energy Transport Sector Justice Gender Vocational sanitation Governance Development Finances Natural Food Development Training disasters security 1 1 1 2 1 1 1 1 3 1 1 1 1 4 Great Britain 1 1 5 Japan 1 1 6 Norway 1 7 Germany 1 1 1 1 1 1 1 8 The Netherlands 1 1 1 1 1 1 1 9 The 1 1 1 1 1 1 10 European Union 11 12 UNDP 13 WFP 14 FAO 15 UNICEF 16 UNFPA 17 UNHCR 18 IFAD 19 WHO 20 UN Women 21 UNESCO 22 UNCDF 23 IOM 24 UNAIDS 25 Global Fund 26 World Bank 27 28 Arab Fund 29 UNIDO 30 Trade Mark 31 BADEA 32 OPEC 33 Kuwait Fund 34 Saudi Fund 35 AfDB

X

Annex 5: Macroeconomic Indicators Burundi Selected Macroeconomic Indicators

Indicators Unit 2000 2013 2014 2015 2016 2017 (e) 2018 (p)

National Accounts GNI at Current Prices Million US $ 880 2,930 3,137 3,130 3,235 ...... GNI per Capita US$ 130 280 290 280 280 ...... GDP at Current Prices Million US $ 709 2,452 2,706 2,814 2,874 3,053 3,406 GDP at 2000 Constant prices Million US $ 709 1,127 1,174 1,170 1,191 1,188 1,205 Real GDP Growth Rate % -0.9 4.9 4.2 -0.3 1.7 -0.2 1.4 Real per Capita GDP Growth Rate % -3.0 1.5 0.9 -3.6 -1.6 -3.4 -1.8 Gross Domestic Investment % GDP 7.5 14.3 15.2 11.7 9.6 10.0 11.7 Public Investment % GDP 6.4 5.2 4.9 3.3 3.1 3.4 3.7 Private Investment % GDP 1.2 9.1 10.3 8.5 6.5 6.6 8.1 Gross National Savings % GDP -4.2 -4.3 -3.4 -6.7 -4.1 -5.7 -7.2

Prices and Money Inflation (CPI) % 24.3 7.9 4.4 5.6 5.5 14.5 15.4 Exchange Rate (Annual Average) local currency/US$ 720.7 1,555.1 1,546.7 1,571.9 1,654.6 1,735.2 1,820.5 Monetary Growth (M2) % 34.8 11.1 14.6 5.5 1.5 10.6 ... Money and Quasi Money as % of GDP % 24.6 30.7 32.0 32.0 30.2 29.9 ...

Government Finance Total Revenue and Grants % GDP 22.3 26.6 19.8 16.7 15.9 20.4 20.2 Total Expenditure and Net Lending % GDP 24.7 28.5 23.6 24.4 23.0 26.9 29.0 Overall Deficit (-) / Surplus (+) % GDP -2.3 -1.8 -3.8 -7.7 -7.1 -6.5 -8.8

External Sector Exports Volume Growth (Goods) % 4.7 -19.8 23.1 5.6 14.8 -4.8 1.8 Imports Volume Growth (Goods) % 1.7 -0.5 10.3 -35.9 -2.2 -1.9 5.1 Terms of Trade Growth % -22.0 -9.6 25.4 -42.7 28.0 -2.8 -7.2 Current Account Balance Million US $ -61 -254 -394 -374 -355 -354 -353 Current Account Balance % GDP -8.6 -10.4 -14.5 -13.3 -12.3 -11.6 -10.4 External Reserves months of imports 2.9 3.6 3.5 1.7 1.7 2.9 3.1

Debt and Financial Flows Debt Service % exports 70.1 14.5 14.4 20.7 22.4 27.5 36.7 External Debt % GDP 126.3 21.0 18.9 18.2 16.7 25.9 35.2 Net Total Financial Flows Million US $ 79 589 539 260 734 ...... Net Official Development Assistance Million US $ 93 559 515 367 742 ...... Net Foreign Direct Investment Million US $ 12 7 47 7 0 ......

Real GDP Growth Rate, 2006-2018 Inflation (CPI), Current Account Balance as % of GDP,

2006-2018 2006-2018 % 6.0 30 0.0 5.0 25 -2.0 4.0 -4.0 20 -6.0 3.0 15 -8.0 2.0 -10.0 10 1.0 -12.0 -14.0 5

0.0 -16.0

2014 2015 2016 2017 2018 2,008 2,012 2,015 2007 2008 2009 2010 2011 2012 2013 2,006 2,007 2,009 2,010 2,011 2,013 2,014 2,016 2,017 2,018

0 2006 -18.0

2008 2013 2015 2007 2009 2010 2011 2012 2014 2016 2017 2018 -1.0 2006

Source : AfDB Statistics Department; IMF: World Economic Outlook,April 2018 and International Financial Statistics, April 2018; AfDB Statistics Department: Development Data Portal Database, April 2018. United Nations: OECD, Reporting System Division. Notes: … Data Not Available ( e ) Estimations ( p ) Projections Last Update: May 2018

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Annex 6: Implementation of the CPIP 2018

Key Implementation Issues/Challenges/ Actions Considered Outcomes Indicators Responsibility Target/Timelines Progress Constraints

Quality at Entry

Systematically Partially update technical 100% of projects Continued Poor quality at studies before Good quality studies are executed GoB New projects take the approval by the available on time according to AfDB Dec 2019 for IOP entry of projects quality of technical AfDB Board of expected costs projects 2019 studies into account. Directors

Partially

The Bank team Ownership of the content Effective conducts Working sessions to of documents (appraisal involvement of the GoB/ consultations in discuss the content Continued report, etc.) by the national technical AfDB ministries involved in of documents national party team projects to establish inventories and needs in preparation of Significant delays projects in starting projects Achieved Implementation Acceleration of Projects approved Projects are executed deadlines project GoB/ 50% in 2019, between November according to initial shortened very implementation AfDB 2018 and March 2019 schedules significantly (less Continued procedures were signed on than three months) average less than 3 months after approval

project implementation

Training and 3-day appropriate training/coaching Achieved coaching of project session for teams at the launch management teams Training sessions are Mastery of of projects in charge of new organised regularly operations for staff of project procedures/ (Tanzania-Burundi implementation units. Road, TAAT and GoB/ Improved skills At least 80% of Continued gradual reduction Biomedical Centre); AfDB PIU members have of procurement and received training deadlines Not Achieved once a year at

fiduciary clinics Fiduciary clinics not yet organised (SNFI1, SNFI2, Number of COBI, RDGE) fiduciary clinics

Avoid setting up parallel execution units for new Partially projects by entrusting their AfDB-financed projects are executed management to Effective management PIU experts are GoB/ Continued only by autonomous existing units efficient AfDB administrative project structures and open implementation units. key positions to Key positions are not competition open to competition

Poor performance Initiate performance Achieved of PIUs contracts for project Project managers sign managers in general, High performance of Project managers 50% in Nov. 2020 GoB performance and project finance management units evaluated Continued contracts. Annual managers in assessments are particular planned

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disbursement performance

All disbursement requests are paid in less Number of bills Payment of bills PIUs/AfDB outstanding for outstanding for more than 15 days Continued Partially more than 3 than 3 months AfDB Requests are processed months quickly

Improve the quality PIUs are trained by the Number of projects of requests; mastery Bank on AfDB disbursing more of AfDB rules and disbursement procedures AfDB/PIUs Partially than eight months Continued procedures through Meetings at the COBI after approval (last Disbursement training and working Office and by VC with 12 months) sessions delays the FIFC are organised

Partially

No disbursement expert at the Country A disbursement % of DPs going Disbursement requests Office, but a expert at the through the AfDB AfDB/PIUs June 2020 are processed promptly mechanism has been Country Office Office put in place and all Disbursement Requests go through the AfDB Office

Financial Management

Financial management does not respect rules and good practices / preparation and timely submission of audit reports

Number of projects submitting audit Delay in Share experiences Projects submitting audit reports late submission of with successful reports within the (current year) PIUs/AfDB June 2020 Not achieved audit reports projects in this deadline within deadlines domain participating in sharing of experiences

Percentage of new Absence of Make the procedures projects with a 50% in June 2020 Not achieved procedures Procedures manual manual available at PIUs/AfDB manual at project validated before launch project launch procedures manual Continued start up available

% of projects Recruit auditors on submitting closing time, in accordance audit reports on Auditor recruited time (9 months Delay in with the rules to 100% in Dec 2019 according to PPM after disbursement transmitting the avoid rejection. PIUs/AfDB Not achieved deadline) Continued audit report Prepare the project Audit report closure audit report submitted latest 30 June N + 1

Monitoring and coordination

At least one Partially Organise portfolio portfolio Better coordination An AfDB portfolio monitoring meetings coordination and PIU/MFBCD/ between different project Continued review meeting was with PIUs and monitoring AfDB stakeholders. held in November AfDB meeting is 2018 and another on organised quarterly 28 February 2019. Lack of an effective project Number of monitoring and Regular supervision Decrease in supervisions per AfDB/GoB Continued Partially evaluation system of projects by AfDB implementation delays project in the calendar year

A quarterly Regular More effective progress report is 45 days after the transmission of a monitoring of operations PIU Partially sent regularly by quarter physical and progress by MFBP. financial progress the PIUs to MFBP.

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report of projects to MFBP

Partially Strengthen Take into account the At least 2 annual GoB/ Meetings between consultation by PIUs regional dimension of Continued meetings organised AfDB PIUs of regional of regional projects projects projects are organised The complexity of as needed regional energy Partially operations delays Provide technical their implementation assistance in project An energy expert management to Decrease in An energy specialist

REGIDESO implementation delays available AfDB Continued (consultant) has been recruited and is based Provide the Country for energy projects at the AfDB Country Office with an Office. energy expert

Project Follow-up of Number and implementation recommendations of 100% in June 2020 Partially Project management has percentage of PIU/ GoB/ weaknesses the Bank’s Internal improved recommendations AfDB Audit from 5 to 24 Continued November 2018 implemented

Reimbursement Review the audit and/or rationale of submitted by AfDB special account in September 2018, PIU/ GoB/ March 2020 Partially balances for closed provide the available Projects are well closed Number of closed AfDB projects justifications and projects that did Continued refund unjustified not justify or balances refund account Systematically balances reimburse special Projects are well closed Not achieved account balances after project closure

Lack of some key Hold regular skills at the Bank's meetings between Number of Meetings were held Dec. 2019 office in Burundi / -based meetings by VC during field missions by AfDB/PIUs Partially reaction time project teams and between the AfDB Nairobi-based experts Continued project managers by and Government video conference

Experts to be placed Partially in the Office: Strengthen close Number of new Dec 2020 Two consultants, an energy, agriculture, dialogue with PIUs and AfDB experts energy and a transport procurement and the Government Continued expert, have been disbursement assigned to the Office

Properly analyse the feasibility of the Percentage of counterpart projects facing contribution and the difficulties in effective paying the Insufficiency/delay involvement of the counterpart 60% in Dec 2020 in payment of the Counterpart funds are national budget PIU/AfDB Not achieved registered in the FL contribution counterpart department during Continued contribution preparation 100% of counterpart funds Reminder of annual are disbursed on commitments before time the finalisation of the Finance Law

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Annex 7: Key Performance Indicators for the Current Portfolio

Table 1 - Key Portfolio Performance Indicators 2012 2013 2016 2017 2018 Number of projects 14 19 15 17 17 Managed in the field (%) 14 26 47 59 76 Total commitments (UAM) 245 240 265.3 263.64 305.287 Projects at risk (%) 9 11 0 0 0 Commitments at risk (%) 9 5 0 0 0 Problematic projects (#) 0 1 2 5 1 Disbursement rate (%) 36.5 44.0 41.9 54.10 45.2 Average age of projects (year) 3.5 3.0 3.5 4.4 4.1 Deadline of first disbursement 9.3 17.2 16.2 2 21.4 (month) Portfolio performance 3.40 3.46 3.70 3.50 3.40 Implementation progress (IP) 3.28 3.30 3.80 3.50 3.40 Development objective (DO) 3.74 3.77 3.60 3.50 3.30

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Annex 8: Ongoing Portfolio (29 March 2019)

Completion Grant Disbursement PROJECT NAME Approval Date Date Amount (UA) Rate

1 2 3 4 5 Project to Support the Development 1 17/05/2017 30/09/2020 877,000 40.40% Strategy Preparation Process Youth and Women's Socio-economic 2 25/05/2016 31/12/2020 770,000 35.93% Reintegration Support Project - PARSEJF Youth and Women's Socio-economic 3 Reintegration Support Project - PARSEJF 25/05/2016 31/12/2020 380,000 32.73% (CIRGL) 4 OBR Capacity Building Support Project 02/01/2019 31/12/2021 1,000,000 0% RN-3: MUGINA-MABANDA-NYANZA-LAC 5 27/06/2012 31/12/2019 27,500,000 83.53% Road Development and Asphalting Project RMUNGE-GITEZA AND KABINGO-KASULU- 6 22/11/2018 31/12/2024 47,250,000 0.00% MANYOVU Road Rehabilitation Project RN-15: GITEGA-NYANGUNGU-NGOZI 29/06/2011 31/12/2019 10,000,000 41.34% 7 Development and Asphalting Project 29/06/2011 31/12/2019 32,000,000 98.65% Phase II RN-18: NYAKARARO-MWARO -GITEGA 01/02/2017 31/12/2020 9,720,000 15.41% 8 KIBUMBU-GITEGA (MWEYA) Phase II 01/02/2017 31/12/2020 4,080,000 16.01% RN-18: NYAKARARO-MWARO-GITEGA 9 Road Development and Asphalting Project 24/09/2014 30/06/2019 19,420,000 86.70% Phase I Support Project for Agricultural 10 Transformation in the Bugesera Natural 15/12/2017 30/06/2023 12,000,000 2.80% Region Project to Support the Supply of Cooking 11 Energy and Environmental Restoration in 02/05/2018 30/06/2019 1,000,000 51.07% Four Refugee Camps 12 JIJI-MULEMBWE Hydropower Project 23/06/2014 31/12/2019 14,340,000 0.00%

NELSAP Interconnection Project - 13 BURUNDI (KAMANYOLA Power 27/11/2008 31/12/2025 15,150,000 30.20% Transmission Line (DRC) - BUJUMBURA

14 RUZIZI III Hydropower Project (BURUNDI) 16/12/2015 30/12/2021 19,290,000 0.00% RUSUMO Regional Hydropower Project - 27/11/2013 31/08/2021 16,700,000 1.37% 15 BURUNDI 21/11/2013 31/08/2021 10,810,215 7.29% Burundi and Rwanda Power Grids 14/12/2018 30/06/2025 2,510,000 0.00% 16 Interconnection Project under NELSAP 14/12/2018 30/06/2025 3,170,000 0.00% Total (16 Operations) 246,967,215

PP = Problematic Project Non-PP = Non-Problematic Project PPP = Potentially Problematic Project Non PPP = Non-Potentially Problematic Project

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Annex 9: CPIA Ratings 2013-2016

2013 2014 2015 2016 Economic management (Cluster A) 3.5 3.5 3.2 2.8 Budget policy 3.5 3.5 3.0 2.5 Monetary policy 3.5 3.5 3.0 2.5 Debt policy 3.5 3.5 3.5 3.5 Structural policies (Cluster B) 3.4 3.4 3.4 3.3 Finance sector development 4.0 3.0 3.0 2.8 Trade policy 3.0 4.0 4.0 4.0 Regulation of the business environment 3.3 3.3 3.2 3.2 Inclusion/social equity (Cluster C) 3.4 3.4 3.4 3.4 Gender equality 3.2 3.3 3.2 3.2 Equity in the use of public resources 3.5 3.5 3.3 3.2 Strengthening human resources 4.0 3.8 3.8 3.8 Social protection and labour 3.0 3.0 3.1 3.1 Environmental policies and regulation 3.5 3.5 3.5 3.5 Governance (Cluster D) 3.3 3.1 3.0 2.9 Property rights and governance based on the 3.3 3.1 2.9 2.9 rule of law Quality of public administration 4.0 3.6 3.4 3.3 Quality of budgetary and financial management 3.8 2.6 2.5 2.4 Effectiveness of revenue mobilisation 2.6 3.8 3.5 3.5 Transparency, accountability and corruption in 2.7 2.5 2.7 2.7 the public sector Infrastructure and regional integration 3.6 3.6 3.6 3.6 (Cluster E) Infrastructure development 3.6 3.6 3.5 3.5 Regional integration 3.5 3.5 3.8 3.8 Overall CPIA 3.44 3.41 3.30 3.21

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Annex 10: Annex on the Macroeconomic Framework

Chart 3: Consumer price index, inflation (average) 30 (%)

20 Chart 2: Real GDP growth rate (%) 10 10 5 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 0 Burundi Afrique Centrale Afrique

-5 2011 2012 2013 2014 2015 2016 2017 2018 2019 Burundi Afrique Centrale Afrique Chart 4: Revenue and grants (% of GDP) 30

20 Chart 8: Main growth drivers, 2016 11,3 IDE en % de la FBCF 25,7 10 0,0

37,7 0 Aide par habitant ($ EU) 36,5 Burundi: dons (% du PIB) 35,9 2011 2012 2013 2014 2015 2016 2017 2018 2019 Burundi: Total revenue (dons exclus) en % du PIB Croissance annuelle des 2,1 -8,3 exportations (%) 14,8 Afrique Afrique Centrale Burundi -20,0-10,0 0,0 10,0 20,0 30,0 40,0 Chart 6: Current account balance 10 (% of GDP)

Chart 5: Budget balance 0 0 (% of GDP) -10

-5 -20 2011 2012 2013 2014 2015 2016 2017 2018 2019 Burundi Afrique Centrale Afrique -10 2011 2012 2013 2014 2015 2016 2017 2018 2019 Burundi Afrique Centrale Afrique

Chart 7: GDP by sector (%), 2016 50,0 40,7 40,0 30,0 17,5 20,0 11,8 3,2 4,6 5,4 7,4 3,2 10,0 0,3 0,8

0,0

Agriculture,… Mines et… Manufactures Electricité,… Construction Commerce… Transport,… Finance,… Administrati… Autresservices

XVIII

Annex 11: CODE Recommendations on the CSP 2012-2018 Completion Report (Takeaways from the Team)

The Committee on Operations and Development Effectiveness (CODE), which reviewed the CSP 2012-2018 completion report for Burundi as well as the proposed pillars for CSP 2019- 2023, met at Bank Headquarters in on 13 May 2019. This meeting was presided by Ms. CUDRE-MAUROUX, the CODE Chairperson. 1. CODE members noted the CSP 2012-2018 Completion Report and the Proposed Pillars for CSP 2019-2023

2. CODE members expressed support for the two pillars proposed for the new CSP, namely: (i) support for agricultural development and transformation; and (ii) development of transport and energy infrastructure.

3. CODE members agreed to the preparation of a full CSP for Burundi for 2019-2023 because the country has to date fulfilled the required criteria in this regard. However, they recommended that depending on the evolution of the country’s socio-economic situation (including presidential elections planned for 2020), the CSP team may need to adjust the strategy during the mid-term review planned for 2021.

4. CODE members recommended that special emphasis be laid on the analysis of socio- political and economic contexts, taking into account fragility in the new CSP. Outcomes of the "Country Resilience and Fragility Assessment (CRFA)" carried out in December 2018 should be fully integrated into the analysis and should guide the new strategy and operations.

5. CODE members recommended that Pillar I of the new CSP should integrate the TAAT initiative and that crosscutting themes (governance, private sector development, and gender equality) be explicitly reflected in the new CSP.

6. CODE members recommended that the new CSP highlight the Bank’s role in political dialogue.

7. CODE members instructed the Bank to encourage the IMF’s re-engagement in the country.

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Annex 12: Summary of Exchanges of Views with Stakeholders 1. Following the mission conducted as part of the CSP 2012-2016 update in March 2018, a Bank mission visited Bujumbura from 5 to 9 November 2018 with the following objectives: (i) collect information necessary for the preparation of the combined Country Strategy Paper 2012-2016 (CSP 2012-2016) completion report extended to December 2018; (ii) review the 2018 performance portfolio; and (ii) prepare the Bank's Intervention Strategy in Burundi 2019- 2023. 2. The mission held a political dialogue session with the Government of Burundi on 18 December 2018 with the objective to validate the technical working sessions held between 5 and 9 November with central and local public administrative authorities, Burundi’s private sector and technical and financial partners involved in Burundi. The policy session was chaired by the Minister of Finance (Governor of the Bank) with the participation of ministers in charge of transport, energy and agriculture. 3. All the mission outcomes reached during technical discussions were validated by the ministerial session of 18 December 2018. The policy session covered the following areas: (i) Burundi’s economic context and National Development Plan for 2018-2027; (ii) outcomes of the implementation of CSP 2012-2018; (iii) the performance of Bank-financed portfolio projects in Burundi; (iv) strategic orientations of the Bank's CSP 2019-2023. 4. With regard to Burundi’s economic context and the National Development Plan 2018-2027:  The session discussed Burundi’s slight economic recovery observed in 2018; the mission welcomed the Government's ongoing economic stabilisation efforts in the context of heavy external financing constraints; it encouraged the authorities to pursue an open policy with the community of technical and financial partners, particularly with regard to financing the National Development Plan, which has ambitious objectives involving the deep structural transformation of Burundi’s economy.  The discussions noted and welcomed some progress made with regard to Burundi’s resilience capacity, given that the economy has faced numerous constraints since the 2015 crisis. However, they recognised that the current difficulties could only be overcome in a context of expanding the sources of economic financing.  The ministerial session underscored the need for further private sector development to better impact job creation especially for young people in Burundi. In this regard, it recommended Bank support to enhance private sector access to investment financing. It acknowledged that the Bank's interventions in CSP 2012-2018 continue to contribute to reducing factors of production costs (through transport infrastructure, making the country accessible internally and externally, and improving the energy supply). However, it recommended more direct involvement to support the private sector. 5. With Regard to the CSP 2012-2018 implementation outcomes:  Overall, discussions highlighted the positive outcomes achieved in implementing CSP 2012-2018: (i) in terms of strengthening governance (Pillar

XX

1), the session noted the major economic reforms carried out between 2012 and 2014 through budget support operations funded by the Bank (PARE-V, PARGE and PRECA), in addition to the stabilisation of the economic situation at the time; (ii) with regard to infrastructure improvement, the ministerial session highlighted Burundi’s progress in opening up rural areas to link production areas to consumption areas, and ensuring access to basic services such as markets, thanks to the Bank’s support. 6. Regarding the performance of the portfolio of projects financed by the Bank in Burundi:  Portfolio of Bank projects - The session recognised the problem of delays in implementing Bank-financed projects in Burundi and recommended that mechanisms be established to remedy the weaknesses observed. It highlighted the Government’s establishment of a monitoring sheet for projects financed by technical and financial partners in general. The actions should include the restoration of monthly meetings between the Bank and project monitoring structures, reduction/simplification of procedures and the introduction of some degree of flexibility in project management since the agricultural cycle is strongly dependent on seasons in Burundi. For the transport sector, the session noted with satisfaction the existence of a framework for dialogue and functional exchanges that significantly contribute to solutions for improving road project disbursements. In the energy sector, the session acknowledged that the disbursement rates were very low, while noting that longer or shorter approval procedures may affect project performance; 7. Regarding strategic orientations of the Bank's CSP 2019-2023:  The ministerial session endorsed the technical discussions on the strategic directions for the new CSP 2019-203. It underscored the dimension of selectivity owing to Burundi's current resource allocation levels, and validated the proposal that CSP 2019-2023 be structured around two main pillars which, when implemented should: (i) strengthen economic resilience; and (ii) develop infrastructure to support economic recovery. It should be noted that working sessions with technical and financial partners had highlighted the synergies and complementarities that could be developed in these two key areas. Hence: . Under the pillar on build resilience, it was decided that the Bank should provide support to improve the income of rural people, especially the youth and women, through a stronger presence in the following areas: (i) agriculture (support agricultural transformation by targeting fragile, socially and environmentally disadvantaged communities, and implement the Technology for African Agricultural Transformation programme in Burundi); and (ii) private sector development to enable the embryonic private sector to play a greater role in stimulating distributive economic growth in the country, and create internal dynamics to absorb the large number of young unemployed graduates in the country with particular focus on reducing women's unemployment. . In the area of infrastructure development, the ministerial session decided to target two sectors, although it regretted not taking into account the water and sanitation sector. They are: (i) transport, through the continuation of operations undertaken to make the country accessible and create closer connections between production areas and markets (maritime transport

XXI will be particularly highlighted through the rehabilitation of Bujumbura Port) in order to contribute to lowering transaction costs in the country; and (ii) energy, to respond to PND 2018-2027 that emphasizes the construction, rehabilitation and/or extension of energy infrastructure as a prerequisite for the sustainable structural transformation of Burundi’s economy. Therefore, the Bank should continue to strengthen its involvement by prioritising green energy.

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Annex 13: Alignment of DSP Pillars to PND 2018-2026 and the High 5s

Promote youth and women’s agricultural entrepreneurship with a view to their empowerment

Feed Africa Technology Agriculture and know- Pillar 1 – Support how Agricultural Support agricultural development hubs Development and and increase private investment for Transformation Support transformation Diversification and competitive economy

Human capital Build institutional capacity to adapt to climate change. Natural Improve the Quality resources of Life for the People of Africa PND Industrialization 2018-2027

Contribute to bridging the infrastructure Increase in energy gap in the transport and energy sectors production Pillar 2 - Improve Public- Transport and Energy as a factor of inclusion Private Infrastructure Partnerships Regional integration and international Cooperation Promote equitable access to basic Integrate Africa Transport, trade and ICT infrastructure. infrastructure

Improve the Quality Tourism of Life for the People of Africa Light up Africa

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Annex 14: Fiduciary Risk Assessment

Legislative and Regulatory Framework

The legislative and regulatory framework for procurement comprises Law No. 1/01 of 4 February 2008 on the Public Procurement Code (CMP) of Burundi amended by Law No. 1/04 of 29 January 2018, decrees on the establishment, organisation and functioning of the Public Procurement Regulatory Authority (ARMP), the National Directorate of Public Procurement Control (DNCMP) and Public Procurement Management Units (CGMP) as well as ordinances setting thresholds for the award, control and publication of procurement. The CMP scope covers all procurement by Contracting Authorities and all types of public procurement without waiver, except for secret contracts that are incompatible with any form of competition or advertising, or where fundamental interests of national security require such secrecy. To date, most public procurement legislation is available on the ARMP website, which is the Public Procurement Portal.

Overall, arrangements for the preparation, award and execution of contracts are broadly in line with international standards and best procurement practices. Procurement by bid invitation is the default procurement method. The use of other procurement methods must be justified by the Contracting Authority and previously authorised by the DNCMP. Contract splitting is prohibited and directly negotiated contracts and amendments are subject to strict controls. In addition, bidders may appeal to the ARMP Dispute Resolution Commission (CRD) if they feel aggrieved during the procurement process.

However, in practice, it is also important to mention the extremely negative assessment of the June 2011 World Bank Public Expenditure Review. The review finds that public investment is hampered by inadequate selection, poor public procurement and lack of reporting and other instruments to monitor project implementation. Among the factors that impede the procurement process, it cites the overestimation of costs of certain goods and services, the inconsistency of these estimates, corruption and fraud. It is not certain that these practices have ended or improved positively.

Institutional Framework and Management Capabilities

The institutional framework provides for the separation of the functions of procurement, ex- ante control and regulation of public procurement. However, the institutional framework faces risks that may affect its viability. These include: (i) the ARMP lacks financial autonomy to ensure its proper functioning; (ii) internal control is weak at the level of the Contracting Authorities (problem of the independence of CGMPs); (iii) DNCMP control is weak; (iv) the ARMP, DNCMP and CGMPs lack sufficient qualified human resources; and (v) there is a lack of strategy to build the capacity of various stakeholders involved in public procurement.

Decree No. 100/119 of 7 July 2008 on the Establishment, Organisation and Functioning of the Public Procurement Regulatory Authority ARMP confers on the latter the status of an Independent Administrative Authority, with a legal personality and administrative and financial autonomy. ARMP consists of four bodies, namely the Regulatory Board, the Dispute Resolution Committee (CRD), the Disciplinary Commission and the General Directorate. The Regulatory Council of the ARMP is designed as a tripartite body with equal representation (Public Sector, Civil Society and Private Sector). Instead of financial and management autonomy, the ARMP receives only budgetary subsidies from the State, which are otherwise

XXIV insufficient to meet the operational needs necessary for carrying out its missions. Financial and human resource constraints significantly limit the institution's ambitions.

ARMP statistics on the award, execution and control of public contracts is not exhaustive because the contracting authorities do not communicate documents, data and statistics on time to update the public procurement information system. Lastly, it should be noted that annual external audits of public procurement are not carried out on time (inadequate financial resources).

The National Directorate for Controlling Public Procurement (DNCMP) should play a fundamental role in the proper management of the procurement system through ex-ante and ex post controls. In practice, the DNCMP has little material, human and financial resources to control the execution of services rendered. In addition, this Directorate faces major skills problems caused by frequent staff departures and lack of qualified human resources. Besides, all contracts that are initially verified by the DNCMP are not systematically published on the public procurement website, in violation of the CMP. Moreover, convincing reasons are not given for the use of directly negotiated contracts, and the DNCMP is obliged to accept requests by the Contracting Authorities, sometimes due to prevailing circumstances (urgency for example). Reliable information on contract award and compliance outside the information compiled by the DNCMP is scarce, but this information has not been subject to external control. The lack of a manual for archiving and filing procurement and contract monitoring documents is also noted.

The ex-post control exercised by the DNCMP is used to check conformity of procurement procedures for contracts awarded below the a priori control thresholds. In 2016, the ex-post audit involved seven (7) Contracting Authorities for contracts under thresholds awarded during the 2013 and 2014 financial years. It was noted among other things that: (i) all 7 Contracting Authorities awarded numerous very high value contracts, sometimes exceeding the annual budget allocated to each Contracting Authority; (ii) all the Contracting Authorities controlled do not strictly comply with the public procurement law especially with respect to compliance with regulatory thresholds; (iii) most Contracting Authorities practised market fragmentation or fractioning, which is prohibited by law; (iv) the procurement of sub-threshold contracts lacked transparency for the Contracting Authorities controlled.

The Public Procurement Management Units (CGMP) are in charge of planning, preparing bidding documents (DAO) and conducting the procurement procedure at the level of the Contracting Authorities. Under the law, the CGMP must be updated every year, but this is not systematic. It should be underscored that some Contracting Authorities appoint or renew their CGMPs but the appointment instruments are not transmitted to the ARMP. At the level of Contracting Authorities, the independence of CGMPs carries a risk because significant powers are entrusted on the Public Procurement Officer (PRMP), which is not offset by any internal control body within the Contracting Authority. The PRMP chairs the CGMP, proposes the appointment of CGMP members to the minister and appoints members to the bid opening/evaluation and contract award committees.

In view of the Public Expenditure Review and Financial Accountability Report (PEFA 2012), there has been a general improvement in the procurement system with indicator PI-19 "Call for competition, optimal use of resources and control of public procurement” rated C + in 2012, against D + in 2009. However, much remains to be done in terms of transparency and capacity building to improve the effectiveness of the government’s procurement management

XXV framework (ARMP, DNCMP, CGMP). It should be noted that updating public procurement information remains problematic at the level of the ARMP portal.

Procurement Operations and Market Practises

To enhance the efficiency of the procurement process, the CMP provides various stakeholders with deadlines for implementing various stages of the procurement process: from the preparation of bidding documents to the signing of contracts.

In addition, Contracting Authorities are required to develop provisional procurement plans (PPMs) based on their annual programme of activities and allocated budget.

Although the law requires the publication of contract award notices, it should be noted that this requirement is not currently being met as only letters are sent to unsuccessful bidders.

It is also worth noting that some bidders are heavily involved in donor markets, but much less (or not at all) in public procurement financed from the State budget because the public procurement environment is often discouraging for honest potential professional bidders. There is indeed a perception of insufficient transparency and integrity during the following stages: BD preparation and provision; receipt of bids (rejection of bids with distinguishing marks); opening (rejection of bids not properly initialled); assessment (few specific skills per contract); low guarantee of payment on time, which entails risks for the bidders. As such, bidders tend to overstate the costs because they are likely to be paid with a huge delay. The public procurement system is likely to attract only bidders who are well positioned to engage in a circuit of contacts to be paid on time. This does not contribute to a climate of integrity and healthy competition (see Assessment Study of the Institutional and Organisational Capacity of ARMP, DNCMP and CGMPs of Sector Ministries and Capacity Building Plans - CTB).

ARMP (through its Regulatory Board) should engage in partnership with the private sector, through the establishment of constructive dialogue with potential bidders to work together to improve the public procurement system, and more specifically, to obtain best value for money.

Integrity and Transparency of the Procurement System

Legal provisions, including those relating to institutions responsible for combating prohibited practices (bribery, fraud, conflict of interest and unethical behaviour) in public procurement, and those defining responsibilities, accountability and penalties applicable to prohibited practices were reviewed. It appears that: (i) the CMP provides the ethical rules applicable to public authorities, candidates and bidders as well as the attendant specific sanctions (without prejudice to other criminal sanctions); and (ii) in addition, Burundi has set up a legal and institutional framework to fight corruption that overall is close to international standards.

The Government has: (i) developed a national strategy of good governance and the fight against corruption for 2011-2015; (ii) enacted specific laws (Law No. 1/12 of 18 April 2006 against corruption, Law No. 1/27 of 3 August 2006 establishing an anti-corruption brigade with the mission to moralise public life, deter and repress corruption and related offences; Law No. 1/36 of 13/12 2006 establishing the anti-corruption court within the judiciary). In addition, actors in the procurement chain are required to observe standards of ethics and transparency, under pain of sanctions and expulsions when found guilty of acts of fraud and corruption.

In principle, this framework should deter fraud and corruption practises overall. However, the level of corruption remains quite alarming as shown by Transparency International’s corruption

XXVI perception index (CPI). Hence, the CMP provides for specific sanctions (without prejudice to other criminal sanctions) for public authorities and officials who fail to comply with CMP provisions and bidders guilty of acts of fraud and corruption. It is noted that as part of its actions, the ARMP Disciplinary Commission has sanctioned structures for violating the public procurement law and published the list of sanctioned entities on the public procurement website.

The existing complaint system has been reviewed to ensure that it provides for specific conditions that take into account the requirements of impartiality, independence and due process. Procurement decisions are published on the public procurement portal.

Public procurement audits are not conducted regularly due to inadequate financial resources. Audits for the 2011, 2012 and 2013 financial years have already been carried out and were mainly financed by external resources. However, there is a significant delay in conducting external audits. For example, it was expected that the public procurement compliance audit mission for FY 2017 take place in 2018, but to date the report has not yet been published.

Conclusions

Based on the elements noted above concerning Burundi’s national public procurement system, the overall risk for its use in Bank-financed projects is considered substantial. Pending the implementation of reform actions to correct these weaknesses, measures recommended to mitigate the risks that might result are: (i) ensure the financial autonomy of the ARMP in accordance with Law No. 1/01 of 4 February 2008 concerning the CMP amended by law No. 1/04 of 29 January 2018 to enable it to properly carry out its missions ; (ii) significantly build DNCMP's capacity (financial, material and human) to enable it to fully fulfil its duties and responsibilities; (iii) build the capacity of CGMPs and make the appropriate arrangements to ensure the independence of CGMPs from the Public Procurement Officer (PRMP); (v) ensure good publicity and ownership of the legal framework governing procurement with public contract actors; (vi) systematically perform internal and ex-post control of procurement operations in accordance with regulations; (vii) secure financing for public procurement audit operations; and (viii) build the capacity of bidders involved in public procurement (administration, private sector and civil society) through a targeted training programme.

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Annex 15: Country Risk Assessment I. Introduction The fiduciary risk assessment of Burundi's Public Financial Management (PFM) system was conducted as part of the mid-term review of the Country Strategy Paper for Burundi by the Bank's Fiduciary Services Department. This assessment is made in accordance with the Financial Management Policy for operations financed by the African Development Bank Group and the Directive on the Promotion of the Use of National PFM Systems of February 2014. This report on Burundi’s Fiduciary Risk Assessment focuses on three main points: (i) introduction; (ii) executive summary; and (iii) assessment outcome. II. Executive Summary. 2.1 The objective of the fiduciary risk assessment is to respond to the Bank's commitment under the Paris Declaration to maximise the use of national public financial management systems for the financial management of Bank-financed projects and programmes. It is also to evaluate the current financial management system in Burundi and determine its adequacy in producing exhaustive and reliable financial information in real time on the management of projects and programmes financed by development partners, including the Bank, and to identify capacity-building needs for the gradual use of the national PFM system. 2.2 The assessment took into account the PEFA assessment for 2012 and information collected as a result of assessments carried out at the Directorate of the Budget, Directorate of the Treasury, General Inspectorate of Finance, General State Inspectorate, Court of Auditors and Anti-Corruption Brigade. III. Assessment Outcome Regarding the management of public finances, the mission notes an improvement in the management of public finances in Burundi since the 2009 and 2012 PEFAs, including: (i) a new budget nomenclature; (ii) a reduction of the stock of payment arrears on expenditures; (iii) the actual reduction of extra-budgetary funds by the closure of bank accounts, the reduction in the number of funds and the establishment of management systems for administrative public enterprises; (iv) a precise and respected budget preparation timetable and expenditure ceilings contained in the framework letter approved by the Council of Ministers before their dissemination; (v) clear and exhaustive tax and customs obligations with the adoption of customs regulations of the Community of West African States and the adoption of a very simple law on value added tax; (v) shorter deadlines for the repayment of revenue to the Treasury and the frequency of bank reconciliations; (vi) a change in the predictability of cash flows, reliability and frequency of periodic information provided; (vii) investment expenditure that anticipates the execution of externally financed project expenditure; (viii) the establishment of a single treasury account and the provision of reliable information by ministries on expenditure commitment ceilings at least one quarter in advance; (ix) significant progress in the consolidation of account balances into a single State account; (x) the control capacity and audit scope of the General State Inspectorate (IGE) were strongly enhanced; and (xi) significant progress in establishing an Anti-Corruption Commission. Overall country risk is medium given some weaknesses noted, including: (i) the difficulty of tracking the stock of payment arrears on expenditure; (ii) the lack of budgets and accounts monitoring in municipalities by the Ministry of Finance; (iii) the absence of auditing for services and works by the Directorate General of the Budget; (iv) the absence from the Directorate of the Treasury of a nomenclature of supporting documentation, a manual of updated accounting procedures and an updated chart of accounts; (v) the Court of Auditors, which is insufficiently staffed, lacks a permanent file and working files; (vi) the absence of an opinion of the Court of Auditors on State accounts; (vii) the delay in auditing the Budget Act by the Court of Auditors; the last audit concerns the 2015 Budget Act; (viii) the absence of a procedures manual, formalised reports and working files at the General Inspectorate of

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Finance; and (ix) the limited competence of the Anti-Corruption Brigade because it is not authorised to interrogate ministers. The Government of Burundi needs to correct the weaknesses listed above to make the systems satisfactorily compliant with the Paris Declaration. Detailed Risk Assessment INITIAL MITIGATION RESIDUAL FACTORS RATINGS RISK MEASURES RISKS Budget Credibility of the budget 2.5 Average Average Difficulty of tracking the stock of Track the stock of payment arrears on expenditure payment arrears on expenditure. Completeness and transparency 2.5 Average Average Budgets and accounts of Forward the budgets municipalities are not monitored by and accounts of the Ministry of Finance. municipalities to the Ministry of Finance. Budgeting based on national policies 2.7 Weak Weak Predictability and control of budget 2.5 Average Average execution The Directorate General of Budget Get the Directorate does not audit services and works General of Budget to carried out audit services and works carried out. Accounting, recording of information 2.5 Average Average and financial reports The Directorate of Public Treasury Have a nomenclature does not have a nomenclature of of supporting supporting documents and an documents and manual accounting procedures manual of accounting There is now a Single Treasury procedures prepared. Account, which facilitates reconciliations . Internal audit 2.5 Average Average Reports are regularly prepared for the Accelerate follow-up majority of government entities of major issues in the Central, but the managers track major report. issues with delay External audit 0.75 Substantial Substantial The Court of Auditors has insufficient Strengthen the staff. staff, does not have a permanent file Establish a permanent and working files. It certifies the file and working files. accounts of the State and draws up a Provide an opinion in report on the budget execution. the report. Join However, it does not provide an INTOSAI. opinion. Moreover, there is a delay in Accelerate the audit of auditing the Budget Act by the Court the Budget Acts of Auditors. The last audit is on the 2015 Budget Act The mission also notes that the Court of Auditors is not affiliated to the International Organisation of Supreme Audit Institutions (INTOSAI). Public contracts 2.5 Average Average

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For procurement methods that involve For procurement competition. The administration does methods that involve not systematically make available to competition. the public all the information relevant Systematically make to the award of public contracts. available to the public all information relevant to public procurement. Fight corruption 2.5 Average Average Jurisdiction is limited because it is Expand jurisdiction by not authorised to interrogate allowing interrogation ministers. of ministers.

Average Rating: 2.32: Average

Weak: 2.5 to 3 Average: 1.5 to 2.5 Substantial: 0 to 1.5

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Annex 16: Climate Change and Green Growth in Burundi Burundi is a landlocked country in the heart of the Great Lakes region of Africa and lies between meridian 29 °00’ - 30°25 East and parallel 2°20° - 4°25’ South. It covers an area of 27834 km² and belongs to two major river basins: the with an area of 13,800 km² and the Congo River Basin with an area of 14,034 km². The current structure of economic production, dominated by subsistence agriculture, makes the economy highly vulnerable and fragile because it is dependent on vagaries of the weather. Burundi's electricity consumption of 25 kWh/inhabitant/year accounts for only 4% of the energy balance. In 2015, the forest area was estimated at 1,542.2 km², or 5.5% of the national territory. However, the country is experiencing a dizzying rate when compared to the national area covered by forests. Although the forested area accounted for about 11.3% of the national territory in 1990, it represented only 6.7% in 2010, and dropped to barely 5.5% in 2015, at the current rate of 64.54 km² of annual loss of forest cover (i.e. above 2% on annual average). The high demographic pressure on land for agriculture, the absence or lack of access to fuel wood substitutes, recurrent bush fires in some parts of the country, limited reforestation, etc. are all factors that contribute to the continued depletion of this resource. The deficit in the consumption of wood products in relation to sustainable production is about 4.3 million tonnes per year. Although the government reforestation programme helped to increase the forest cover rate from 6.7% 2010 to 12% in 2015, the intensive use of firewood as the main energy source remains a major concern (the deforestation rate was estimated at 2% per year in 2017). This is attributable to the fact that the household electrification rate does not exceed 5% compared to 16% in sub-Saharan Africa. Burundi has abundant water resources thanks to relatively good rainfall, a good network of rivers and the retention of water by marshes and lakes, particularly Lake Tanganyika: 31,900 million m³ of rainfall and 8,170 m³/year (259m³/s) brought by rivers. The country has significant potential for irrigable land in marshes, plains and hills but less than 10% of the land is irrigated. The use of irrigation could enhance crop intensification, increase yields and reduce losses caused by irregular rainfall. With regard to groundwater, Burundi has more than 6,600 litres per second of the resource (574,000 m3/d solely from springs). Groundwater resources vary by natural region. The Imbo, Mosso and Bugesera natural regions have the weakest sources, with 98.3%, 96.6% and 100% of their respective areas falling under the category below 0.3 l/s*km². The average specific resources are 0.05, 0.08 and 0.11 l/s*km² for these three natural regions. In contrast, the Mugamba, Mumirwa and Bututsi natural regions have the most abundant water resources, at respectively 86.6% and 61.9% of their area. They have specific flows above 0.3 l/s*km².). Burundi’s topography comes with a climate variation depending on the altitude, hence a broad geo-climatic diversity. The climate of Burundi is humid tropical influenced by the altitude that varies between 773 m and 2670 m. It is characterised by an alternating rainy season that usually extends from October to May and a dry season that runs from June to September. Overall, precipitation increases with altitude. The minimum rainfall is about 500 mm observable in the Rusizi Plain, while maximum precipitation reaches 2,200 mm in high altitude regions. The average rainfall for Burundi is 1,274 mm. The greatest number of rainy days is observable in April (16 to 26) (Sinarinzi, 2005). Average annual air temperature decreases as the altitude increases. The highest annual average is 24.1° C (Imbo Plain) while the lowest is 15.6° C (Rwegura). The mean monthly maximum temperatures are highest at the end of the dry season (September-October) while the mean monthly minimum temperatures are lowest during the dry season. The country has relatively diversified geomorphological features and is divided into 5 agro-ecological zones: (i) the western plain corresponding to the Imbo natural region that

XXXI occupies 7% of the country’s land area; (ii) the western Mumirwa escarpment that covers 10% of the country's area. The annual rainfall ranges from 1,100 to 1,800 mm, and temperatures vary between 23 and 17° C depending on the altitude; (iii) the Congo-Nile ridge, which includes the Mugamba and Bututsi natural regions with about 15% of the country's area and characterised by annual rainfall between 1,500 and 2,000 mm, and an equatorial mountain climate with average annual temperatures of 12 to 16° C; and (iv) the central plateau encompassing the Buyenzi natural areas. In Burundi, climate disruption is manifested by exceptional rainfall and prolonged drought. In the case of exceptional rainfall, erosion increases, the rivers carry fertile alluvium, raising riverbeds by a few centimetres. In turn, this floods the plains and marshes, and pollutes the water. Land loss is very high in the Mumirwa region and at the origin of the pollution of Lake Tanganyika. These losses are estimated at 100 tonnes/ha/year. The effects of rainfall deficit are the causes of the water deficit in some parts of the country, particularly in the Bugesera and Kumoso depressions, and in the Imbo Nord plain. During long periods of drought, cases of bush fires increase, non-irrigated lowlands dry out and are degraded. Thus, aridity obliges agri- pastoralists to invade marsh ecosystems in search of wet lands. The simulation of climate change within the 2000-2050 timeframe has shown an increase in rainfall ranging from 3 to 10%, while rainfall amounts from May to October will decrease by 4 to 15%. The analysis of average temperature change showed a temperature increase of 0.4º C every 10 years to reach 1.9º C in 2050, corresponding to the high emission of greenhouse gases. In the same vein, studies carried out as part of the first national communication on climate change and climate change parameters in Burundi by 2050 based on the general circulation model, show that the average annual temperature will rise by 1° C to 3° C. Rainfall will increase by + or - 10% and the rainfall regime will be disturbed to the point of having only two major seasons of six months each: a rainy season from November to April and a dry season. These climate changes will engender several risks related to the following phenomena: (i) change of seasons; (ii) flooding of swamps and wetlands; (iii) land degradation and loss of soil fertility; (iv) scarcity of groundwater resources; (v) occurrence of extreme climatic events (hail, violent showers, strong winds, etc.); (vi) changes in the vegetative cycles of cultivated plants and other ; and (vii) other phenomena. Although environmental management in Burundi is governed by legal texts, some of which are older than the Ministry of Environment, these texts are seldom or never implemented. The application of these texts is incumbent on various ministries, depending on the sector (MEEATU, MINEAGRIE, MININTER, etc.). They are listed below: the Land Code (Decree- Law No. 1/008 of 1 September 1986 on the Land Code); Decree-Law No. 1/032 of 30 June 1993 on the Production and Marketing of Plant Seeds in Burundi; Decree-Law No. 1/033 of 30 June 1993 on the Protection of Plants in Burundi; Law No. 1/010 of 30 June 2000 on the Environment Code in Burundi; Decree-Law No. 1/6 of 3 March 1980 on the Establishment of National Parks and Nature Reserves; Law No. 1/02 of 25 March 1985 on the Forest Code; Decree-Law No. 1/41 of 26 November 1992 on the Institution and Organization of the Public Water Domain. The recent merger of the Ministry of Water, Environment, Regional and Urban Planning (MEEATU) and the Ministry of Agriculture and Livestock (MINEAGRIE) to become the Ministry of Environment, Agriculture and Livestock (MINEAGRIE) attests to the importance that the government attaches to an interdependent vision of natural resource management as critical to the fight against food insecurity. In terms of forward and strategic management of climate change, the country has a significant arsenal, including: (i) the plan to combat land degradation (2013); (ii) the action plan to build national capacity on risk reduction and emergency preparedness and response (2013-2016); (iii) the national climate change adaptation action plan (PANA) (March 2013); (iv) national policy

XXXII on climate change (2013); (v) nationally determined contribution (CPDN) (2015); (vi) national communication on climate change adaptation and prediction of extreme weather events (2014- 2018); and (vii) proposal to prepare for REDD (2014). Moreover, although the green economy is not yet a reality in practice, Burundi's resolve to move towards the green economy is enshrined in the country’s Vision 2025 and in its objective on low-carbon photovoltaic development mentioned in the CDN. Besides, Burundi’s National Development Plan 2018-2027 provides that its operationalisation will be translated into sector policies based on the most relevant development issues with a real potential for catalytic effects involving an in-depth approach to sustainable development, by strengthening environmental governance and integrating the green and blue economy perspective into development policies.

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Annex 17 - Non-Sovereign Operations in Burundi 1. Technical Assistance (TA) to Support Agricultural Development Agriculture is the mainstay of Burundi’s economy and practically employs the entire rural labour force. Burundi has several factors to its advantage for the development of a more efficient agricultural sector: favourable climate and geographic conditions for agricultural production, and a strong and growing domestic demand for agri-food products. The major constraints to the sector identified are as follows: - lack of reliable statistics and information systems; - access to financing; - problematic land management for private investment although many government initiatives have been initiated; - weak infrastructure and transport services that hinder links between the various actors in the chain; - embryonic sanitary and phytosanitary system; - significant soil degradation due to deforestation and expansion of cultivation to marginal areas. These constraints have a negative impact on the development of agri-food chains. The input segment remains largely underdeveloped and informal (individual producers and cooperatives). Moreover, the supply of agricultural equipment is virtually non-existent. Overall, Burundi imports a lot more agricultural products than it exports. Smallholders produce the majority of staple food crops (fresh fruits and vegetables, rice, maize, sorghum and wheat, as well as cassava and sweet potatoes). Thus, they provide the largest share of production in the country. The packaging and transformation segment is not well developed. Processing of agricultural products remains artisanal and is carried out by individual producers, cooperatives or women's associations. Distribution and marketing channels are generally not coordinated, and Burundi's agricultural research and development sector has been severely disrupted by years of conflict. In the current context of fragility, improving Burundi's competitiveness in agri-food value chains must, in the short and medium term, focus on national and regional markets and on improving livelihoods through food security and increased income for the population. For the promotion of youth and women's agricultural entrepreneurship and support for agricultural development poles, private sector development operations can focus on the following areas of intervention: - upgrading processes for sustainable intensification of agriculture: improving inputs and soil quality (land preparation, private irrigation projects, improvement of production methods on sloping-valley lands); - upgrading basic crop processing capacity to reduce post-harvest losses; - upgrading storage, processing and packaging capacity in the food products sector.

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Only a long-term strategy can help to achieve the objective of diversification of agri-food exports. This will require the consolidation of essential infrastructure and basic services (transport, value chain coordination framework, suitable human capital, quality standards, access to credit and reduction of market distortions resulting from subsidy programmes). The Bank's technical assistance (TA) needs to help address human capital challenges for all segments of agricultural value chains. It must take into account the fragmentation of production at national level to reach a significant number of actors. Low rates will also be taken into account to ensure effective impact of capacity building actions. TA will be targeted at young people in the sector, including entrepreneurship initiatives. It will take into consideration the need to match skills to real private sector needs. Furthermore, the TA will seek to create links between researchers, educational programmes and the private sector, through the establishment of incentive and common frameworks. 2. Technical Assistance for the Improvement of Energy Infrastructure Burundi has significant potential for energy production. Several large rivers along its borders and all over the country offer opportunities for hydropower generation, while clear skies allow for the efficient use of solar energy. Ninety percent (90%) of the country's energy needs are currently covered by the burning of biomass, mainly wood, for cooking and heat, which contributes to deforestation and health problems. Since the end of the crisis, Burundi is unable to meet domestic demand and uses energy imports to fill the gap. In addition, owing to stronger economic growth in recent years, energy demand will exert additional pressure on the country's energy supply, particularly for upgrading agri- food value chains. The main objectives for upgrading the energy value chain in Burundi today are to increase production, transmission and distribution capacity in order to increase access to electricity and facilitate access to a more reliable power source for industrial growth. The Bank's private sector operations will aim at responding to domestic energy demand and focus on strengthening the electricity value chain, which comprises five major segments: fuel supply, power generation, transmission, distribution and the final consumer. Burundi's power generation is dominated by hydropower. As a result, power supply is dependent on seasonal rainfall; drought years are characterised by significant shortages, while high rainfall contributes to increased supply. Off-grid electricity generation currently includes various energy sources - small hydropower plants (some are not operational), diesel generators and solar panels used by various private and public sector players. Burundi's transmission network relies on outdated technology and lacks maintenance. In addition, the network is concentrated in the country’s northwestern and central areas and around Bujumbura, leaving a large part of the country abandoned. Electricity is distributed mainly in the country’s urban areas, with only 2% of rural households connected to the grid; rural electrification is almost non-existent. Several constraints hinder the improvement of power supply in the country: weak ministerial capacity, operational inefficiencies resulting from REGIDESO’s structure (lack of autonomy from the government, mismatch between rates and costs associated to the company structure), access to finance and limited information systems. In the current context of fragility, three areas of intervention are prioritised because of their feasibility and potential to contribute to improving people's livelihoods, job creation and private sector participation:

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- rehabilitation of existing generation network and facilities, including the renovation of existing hydropower plants and the national grid to improve generation capacity and reduce transmission and distribution losses (process upgrading by integration of more sophisticated technologies or processes); - expansion of the transmission and distribution network to increase access to electricity for businesses and individuals in under-served areas of the country, facilitate interconnection with other countries and improve ROI for production from power plants (upgrading processes); - support off-grid development for rural electrification and help private sector companies and other actors invest in technologies that reduce reliance on domestic supply, freeing up resources for other users (upgrade processes and develop renewable energies). In this context, technical assistance activities could create links with local MSMEs for the construction and maintenance of facilities that require semi-skilled and unskilled labour. The Bank's technical assistance (TA) will also help to address human capital challenges in the electricity value chain. The sector faces a number of significant challenges. These include weaknesses in human resource management practices, dysfunctional promotion policies within REGIDESO, a geographic gap between the demand and supply of labour, gaps in the formal education system and the lack of reliable labour market data. Technical and vocational schools lack adequate facilities, equipment and teaching staff. As a result, they re-orientate teaching towards the provision of theoretical knowledge at the expense of practical training. Hiring in rural areas is difficult and requires the establishment of regional education and training centres. In addition, pressures will be exerted on the existing workforce with the arrival of new technologies such as prepaid meters and computer systems for monitoring transmission and distribution networks of the power grid. TA will help to identify current skills gaps, develop appropriate training programmes, and provide the skills needed to grow the sector. Based on this needs assessment, a recruitment strategy can be developed. TA will also aim to support stakeholder capacity building through hands-on training programmes for technicians, on-the-job training for engineers, and training and certification programmes for electricians. Stakeholder capacity building for participation in regional operations is also critical, since regional energy projects require coordination with several countries in key areas. The ability of public actors to attract private investors, negotiate concessions and PPP contracts will also be supported.

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Annexe 18 – Burundi : 2018 CRFA’s Main Results.

CRFA Dimension Scores

Capacity Pressure

Inclusive Politics 3.62 5.63

Security 2.34 4.68

Justice 1.92 5.56

Economic & Social Inclusiveness 2.82 3.33

Social Cohesion 2.03 3.34

Externalities/Regional Spillover Effects 2.97 2.70

Climate/Environmental Impacts 3.19 3.79

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Annex 19 – Riskmitigations measures

Risks Assessment Mitigation Measures

Political instability and the risks posed by the Efforts by the international community to restore inter-Burundian High 2020 elections. dialogue could help mitigate these risks. The Bank should intensify its capacity-building efforts and support Weak institutional and human capacity could Burundi through technical assistance. This assistance will focus on adversely affect programme Moderate strengthening project monitoring and evaluation capacity, and implementation. technical capacity in sectors of Bank involvement. Poor knowledge and/or ignorance of Support appropriate institutions in defining adaptation and mitigation "climate vulnerability hotspots" could be a Moderate priorities across socio-economic sectors, and promote the risk for the performance of the portfolio. mainstreaming of climate change into Bank investments. New operations will be systematically subject to economic and The lingering effects of the crisis could be a political analysis to identify "special measures" for the successful risk for the performance of the portfolio, Moderate implementation of projects. Portfolio performance in Burundi has especially the new operations. remained comparable to the Bank average despite the crisis. The Bank will keep up its close monitoring efforts.

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