Burundi - Economic memorandum : current situation and institutional constraints

Report No. 3071-lBU Economic Memorandum The Burundian Economy: Current Situaton and Institutional Constraints February 1981 Eastern Africa Region Country Programs II FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS AND UNITS Currency Unit: The Burundi Franc (BuF) Exchange Rates: Through February 1973 US$1.00 - BuF 87.5 March 1973 - May 2, 1976 US$1.00 - BuF 78.75 Since May 3, 1976 US$1.00 - BuF 90.0 Fiscal Year: January 1 - December 31 Standards: Metric  FOR OFFICIAL USE ONLY TABLE OF CONTENTS Page No. SUMM1ARY AND CONCLUSIONS ................ * ..... 9 *i INTRODUCTION AND BACKGROUND .............. .. ............... I. RECENT ECONOMIC DEVELOPMENTS AND CURRENT ISSUES ........... 4 A. Recent Economic Developments ......................... 4 1. Growth, Investment and the Role of the Public Sector .......................................... 4 2. Domestic Demand and its Composition .... ......... 7 3. Other Developments .............................. 11 B. Current Issues ....................................... 14 II. SOCIOECONOMIC SITUATION, GOVERNMENT RESPONSES AND DECENTRALIZED EFFORTS ..................................... 18 A. Socioeconomic Situation .............................. 18 1. Population Pressure ............. .. .............. 18 2. Nutrition and Health ............................ 19 3. Migration ....... ............. ................... 20 4. Demographic Attitudes ............ .. ............. 21 5. Energy Implications ............. .. .............. 21 B. Government Efforts ................................... 23 1. Population ...................................... 23 2. Agricultural Planning and Programming .... ....... 23 3. Energy .......................................... 27 4. Health .......................................... 28 5. Education and Employment ........................ 30 C. Efforts of Parastatals and Decentralized Organizations ........................................ 32 1. Selected Parastatals ............ .. .............. 32 2. Decentralized Organizations ......... .. .......... 37 a. Cooperatives ................................ 37 b. Religious Missions .......................... 38 c. Secular Groups .............................. 40 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  -2- Page No. III. IMPROVEMENTS OF INSTITUTIONS INCENTIVES AND ALLOCATION OF RESOURCES TO REGIONAL DEVELOPMENT ...................... 41 A. Improvement of the Policy-Making Process .... ......... 41 1. Harmonizing National Agricultural Policies with Project Interventions ........................ 41 2. Eliciting Small Farmer Participation .... ........ 43 B. Incentives to Encourage Efficiency .... ............... 44 1. Farmers' Organizations .......................... 44 2. Government Programs and Management of Parastatals ..................................... 45 C. Allocation of Economic Resources to Regional Development .......................................... 47 1. Regional Development ............................ 47 2. Investment Allocation ........................... 47 IV. MACROECONOMIC ISSUES AND INSTITUTIONAL IMPLICATIONS ....... 50 A. Allocation of Coffee Revenues ........................ 50 B. Tax Measures and Restraining the Growth of Current Expenditures ...................................... 51 C. The Composition and Size of an Investment Program .... 53 D. Financing of the Investment Program .... .............. 58 E. The Current Account Deficit and its Financing ........ 60 F. The Price System and the Policy-Making Framework ..... 64 STATISTICAL APPENDIX This memorandum was prepared by an economic mission that visited Burundi in November/December 1979. The mission consisted of Messrs. Alberto Eguren (mission chief), Helmut Sanger (agricultural economist), Ingo Evers (consultant in macroeconomics) and Ms. Colleen Clifford (human resources and statistics. Ms. Cynthia L. Tobias (consultant in sociology) also contributed to this memorandum.  LIST OF TEXT TABLES Page No. Table 1: Growth of the Public Sector ...........,.,,,...., 5 Table 2: Government Finances ........... ., 6 Table 3: Structure of Government Expenditures . . 7 Table 4: Aggregate Demand and Supply Indicators . . 9 Table 5: Capital Account of the Private Sector and of Public Enterprises ...... ................................ 10 Table 6: Population Density and Growth Rates by Region .... ........ 20 Table 7: Distribution of Public Health Medical Facilities and Personnel by Region, 1979 ............................ 29 Table 8: Manpower Needs and Availabilities, 1978-82 .... ........... 31 Table 9: Incremental Cash Income from Coffee Accruing to the Average Small Farmer ..................................... 42 Table 10: Alternative Coffee Producer Prices in Current Terms and their Macroeconomic Implications ..................... 52 Table 11: Hypothetical Government Revenues and Expenditure .... ..... 54 Table 12: Hypothetical Consolidated Statement of Government Finances ................................................. 55 Table 13: Macroeconomic Framework, 1978-1984 ....................... 57 Table 14: Hypothetical Financing Plan for Total Investment .... ..... 59 Table 15: A Hypothetical Balance of Payments Scenario .... .......... 63 Table 16: Hypothetical Consolidated Banking System Accounts ........ 65   BURUNDI COUNTRY DATA AREA POPULATION DENSITY 27,820 sq. km. 4.0 million (mid-1979) 145.0 per sq. km. Rate of growth 2.1 (from 1970-79) POPULATION CHARACTERISTICS (1974-78) HEALTH (1979) Crude Birth Rate (per 1,000) 47.0 Pogulation per physician 37,240 Crude Death Rate (per 1,000) 20.0 Population per hospital bed 78RI INCOME DISTRIBUTION DISTRIBUTION OF LAND OWNERSHIP % of National Income, highest quintile % owned by top 10% of owners lowest quintile .. Z owned by smallest 10% of owners ACCESS TO PIPED WATER (1979) ACCESS TO ELECTRICITY Urban population 94.0 % of population - total - rural NUTRITION (1974-78) EDUCATION (1974-78) Calorie intake as % of requirements 97.0 Adult literacy rate % 25.0 Per capita protein intake (grams/day) 60.0 Primary school enrollment % 23.0 GNP PER CAPITA IN 1979-/ : US$180 GROSS NATIONAL PRODUCT IN 1979 _/ ANNUAL RATE OF GROWTH (%, constant prices) US$ MLN. % 1970-76 1976-79 1979 GNP at Market prices 798.8 100.0 2.3 5.4 3.2 Gross Domestic Investment 100.4 12.6 12.8 15.2 -5-9 Gross National Saving 4/ 14.6 1.8 24.0 22X0 -29'4 Current Account Balance -38.9 -4.9 . . Exports of Goods, NFS 108.7 13.6 0.5 9.9 14.0 Imports of Goods, NFS 177.8 22.3 5.4 14.0 12-2 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1979!/ Value added US$ Mln. % Agriculture 400.5 54.8 Industry 110.1 15.1 Services 219.5 30.1 Total 730.1 100.0 GOVERNMENT FINANCE Central Government-/ (Bug Million) Percent of GKWP 1979 (P) 1979 1976 - 78 Current Receipts 10,137.3 13.8 14.8 Current Expenditure 8,872.4 12.1 11.2 Current Surplus 1,264.9 1.7 T3, Capital Expenditures 6,300.0 8.6 8,0 External Assistance (net2 2,700.0 3.7 3.6 NOTE: All conversions to dollars in this table are at the average exchange rate prevail- ing during the period covered. 1/ The GNP per capita is based on the World Bank Atlas methodology. 2/ Preliminary. 3/ Consolidated statement of Government finances. 4/ Excluding current transfers from abroad.  Page 2 of 2 MDNEY, CREDIT and PRICES 1975 1976 1977 1978 1979 (Million BuF outstanding end period) Money and Quasi Money 3544.4 5220.9 8283.2 9411.2 11452.7 Bank credit to Public Sector 1271.6 1125.0 270.8 1660.8 4150.4 Bank credit to Private Sector 997.0 1532.2 1886.9 4491.3 6220.4 (Percentage or Index Numbers) Money and Quasi as % of GDP 10.8 13.2 16.8 17.0 15.6 General Price Index (1970'100) 153.1 163.6 174.6 216.4 274.61/ Annual percentage changes in: General Price Index 15.8 6.8 6.7 23.9 26.93/ Bank credit to Public Sector 41.7 -11.5 -75.9 513.3 149.9 Bank credit to Private Sector -60.3 53.7 23.1 138.0 38.5 BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 19 -79) 1976 1977 1978 3/ 1979 3/ US$Mln 2 (Million US Dollars) Exports of Goods, NFS 61.5 96.3 71.4 108.7 Coffee 71.5 90.4 Imports of Goods, NFS 74.8 94.7 123.4 177.8 Cotton 2.4 3.0 Resource Gap (deficit -) -13.3 1.6 -52.0 -69.1 Skins 0.9 1.1 Tea 1.6 2.0 Interest Payments (net) -0.5 *0.6 -0.9 -1.4 Workers' Remittances .. Other Factor Payments (net) -10.7 -13.1 -13.6 -15.3 Net transfers 31.4 29.0 32.7 46.9 All other commodities 2.7 jz5 Balance on Current Account 6.9 16.9 -33.8 -38.9 TOTAL 79.1 100.0 Direct Foreign Investment - - - - EXTERNAL DEBT, DECEMBER 31, 1979 Net MLT Borrowing Disbursements 4.2 17.1 23.2 25.9 US$ Mln Amortization 2.8 2.2 1.8 2.6 Subtotal 1.4 14.9 21.4 23.3 Public Debt, incl. guaranteed 103.0 Capital Grants 13.9 13.8 21.0 25.3 Non-Guaranteed Private Debt ,. Other Capital (net) -7.0 -0.3 -24.6 -6.5 Total outstanding & Disbursed Other items n.e.i. 0.4 0.8 6.9 12.7 Increase in Reserves (-) -15.4 -46.1 9.1 -15.9 DEBT SERVICE RATIO FOR 1979 - Gross Reserves (end year) 21 49.2 95.9 83.4 98.7 Public Debt, incl. guaranteed 3.2 Net Reserves (end year) 42.5 88.6 79.5 95.4 Non-Guaranteed Private Debt Total outstanding and disbursed Fuel and Related materials Imports of which: Petroleum 4.4 5.6 6.7 12.6 IDA LENDING, November 30, 1980 (Million US Dollars) RATE OF EXCHANGE IbA - ~~~~~~~~~~~~~~~~~Outstanding & Through Feb. 1973 Since May 3, 1976 Disbursed 36.0 US$1.00 - BuF 87.5 US$1.00 - BuF 90.0 Undisbursed -c6.8 BuFlOO - US$1.14 BuF 100 - US$1.11 Outstanding incl. _. undisbursed 9q2.8 From March 1978 to May 2, 1976 US$1.00 - BuF 78.75 BuF 100 - US$1.27 1/ Ratio of Debt Service to Exports of Goods and Non-Factor Services. 2/ Central Bank .. not available 3/ Preliminary estimates . not aDplicable January 21, 1981  29- 20-30' i3- \E 3030' BURUN DI POPULATION DENSITY, 1979 R W A N D A DENS/TE DE POPULA I/ON, /979 PERSONS PER KM' BY COMMUNE: NATIONAL CAPITAL ' hnhoe # ke ;qABITANTS PAR gM' PAR COMMUNE CAP/TALE NATIONAlt j .. LESS THAN 50 /.O/0NS DE SO PRINCIPAL TOWNS PROVINCES 'R SO - 200 V/lItS PR/NC/PALES, PROVINCES \ V200 -300 __ MAIN ROADS 300 -375 ROUTES PR/NC/PAZES ' ? . 37S c RIVIERES KIRUNDO BUSONI I- COMMUNES SURVEYED IN AUG'ST COMMUNE BO IS 1 ' COMMUNES E/VOULETFFS 2CRS DU FRONTtERES DES COMMUNES !< RECENSEMENT PILOTE DAOUT 1978 _ ARRONUDSSEMENT BOUNDAR ES do FRONTIERES DES PROVINCES u ,,' 1 - | ~~~~~~~NTE RNrAETI"ON AL BOUrNDA RI9XES 4,_ ./ ERONTIERES /NTEPNATIONALES " '\ N 1 0R ~' '~ *-~ TANOGARA / LU ~ BUA GENYUZIK LLJ WERU~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~UUD ~~~~~~~~-A~~~~~~~~~~~~ 5 RA R U Y ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~WrI Goo I tf o/.o) IJ0 t .. parot1 / '/60000000 ''On tt8 /ooatta of the I1tT ;j 1 -. t ~ YE) Wcrg epkodt flen bvtt |). \ 3, M P~~~~KN,q AABA A~W 22