Burundi - Highway Engineering Project

RESTRICTED Report No. P-824 'RLE COPY This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF BURUNDI FOR A HIGHWAY ENGINEERING PROJECT May 25, 1970  INTEMIATIGNAL D EVELOPME\T ASSOCIATION REPORT ATD RECCLiLENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPlI-ET CREDIT TO THE REPUBLIC OF BURUNTTDI FOP, A HIGHWAY 2U=GEjEERIUG PROJECT 1. I submit the following report and recommendation on a proposed credit in an amount in various currencies equivalent to $380,000 to the Republic of Burundi to finance a highway engineering project. PART I - HISTORICAL 2. The Bank was executing agency for a UNDP feasibility study, carried out in 1968-1969,of an international road link between Bujumbura, the capital of Burundi, and Kigoma in Tanzania, a port on Lake Tanganyika and railhead for the East African Railways line to Dar-es-Salaam. The study concluded that the volume of international traffic did not warrant improving the whole route between Bujumbura and ligoma, the southern section of which would be in competition with established lake transport, but that improvement of the road within the territory of Burundi between Bujumbura and Nyanza Lac on Lake Tanganyilka would be economically justi- fied. An IDA mission visited Burundi in December, 1969. to appraise the suitability of the Bujumbura-Nqyanza Lac road for an engineering credit together wjith the need for improved highway administration and mainte- nance services. The Government subsequently requested the Association to include in the proposed Droject a study of required betterment works to provide all-weather reliability on the Gitega-Canluzo-Tanzanian border road. 3. Negotiations were held in IJashington from April 27 to 30, 1970. The Burundian delegation was led by the Honorable Harc Ndayiziga, lidnister of Public Works, and included Mr. A. Bankebabone of the i-inistry of Finance, hr. E. Kalisa of the hinistry of Public Wiorks and Mr. J. Ntakabanyura, Charge d'Affaires a.i. of the Burundian Embassy in WlJashington. 4. The proposed credit would be the fourth lending operation for a project in Burundi. In 1957, the Bank made a loan of $4.8 million (165-BE) to the then Belgian Trust Territory of Ruanda-Urundi wTith the guarantee of Belgium for a 40 km road and the lake port of Bujumbura. The loan was fully disbursed in 1962. While the dissolution of the Trust Territory and the simultaneous creation of two independent States did not affect the Belgian guarantee, it did raise a question as to the respective obligations under the loan of the former constituent parts of the Trust Territory. This succession problem has not yet been  settled. However, pending such settlemnent, and without prejudice to the rights and obligations of the various parties concerned, interest on and principal of the loan are being paid by Burundi. Since inde- pendence, the Association has made two credits, the first in March, 1966, for the rehabilitation and extension of the water supply system of Bujumbura, and the second in April, 1969, for the improvement of coffee production by smallholders. The following is a summary statement of the 1957 Bank loan and the IDA credits to Burundi as of April 30, 1970: Loan or Amount (US $ million) Credit Year Borrower Purpose Numiber Bank IDA Undisbursed 165-BE 1957 Ruanda-Urundi* Road and Port 4.8 85-BU 19"66 Burundi Water supply 1.1 0.3 147-BU 1969 Burundi Coffee imorovement _ 1.8 1.7 Total: 4.8 2.9 of which has been repaid to Bank and others 2.1 Total now outstanding 2.7 Amount sold: 3.0 of which has been repaid 1.7 1.3 Total now held by Bank and IDA: 1.4 2.9 Total undisoursed: - 2.0 2.0 -With the guarantee of Belgium 5. Progress under the two IDA credits is satisfactory and there are no significant delays in disbursement. 6. The proposed engineering credit may lead to a road construction and rmiaintenance project in about two years time. Possible future lending may also result from a study of an integrated rural development program in the Ilosso area, financed by the UiDP, for which the FAO is executing agency. The Bank itself will be executing agency for a UNDP study, due to begin shortly, of future requirements for investment in electric power.  - 3 - PART II - DESCRIPTION OF THE PROPOSED CREDIT 7. Borrower: The Republic of Burundi Amount: Various currencies equivalent to $380,000. Purpose: To finance the foreign exchange cost of the detailed engineering of the Bujumbura-Nyanza Lac road, and of additional studies of high- way maintenance and betterment. Amortization: In 10 years including a 2-year period of grace, through 16 equal semi-annual installments beginning December, 1972, and ending June 15, 1930. Service charge: 3/4 of one percent per annum. PART III - PURPCSE U. A report entitled "Appraisal of a HIighway Engineering Project- Burundi" (No. PTR-45a), dated H4ay 25, 1970 is attached. 9. The project consists of : (a) the detailed engineering for the reconstruction to bituminous paved standard of the Bujumbura-Mutambara road (76 inm); (b) the detailed engineering for limited improvements to, and gravel surfacing of, the Miutambara-Nyanza Lac road (45 lan); and (c) a study of improvements required in road maintenance and of selected betterment works on the Gitega-Cankuzo-Tanzanian border road (164 kn). 10. Burundi is a small, land-locked country with a population of about 3.5 million. All internal transport is by road; overseas import- export traffic is by road and lake from Bujumbura to Kigoma in Tanzania, and then by rail via the East African Railways to Dar-es-Salaam on the Indian Ocean. About 10% of the population live within the zone of in- fluence of the Bujumbura-Nyanza Lac road, which serves the fishing in- dustry and evacuates the principal agricultural products - coffee, cotton and bananas. The project road is at present an earth road, poorly aligned and narrow. Its improvement is of high priority and would provide a trunk road link between Bujumbura and the southerm part of the country. 11. In recent years, Burundi's road network has deteriorated due to a lack of maintenance equipment, technical skill and finance. Provision is made in the proposed credit for a study of an overall highway mainte- nance program. The study would also include a survey of the 164 km Gitega- Cankuzo-Tanzanian border road, an earth road which serves potentially important agricultural areas in the Eastern part of the country. Cn the  basis of the survey, recommendations would be made for selected better- ment works to give all-weather reliability for this road. 12. The Government and the consultants ejho prepared the feasibility study mentioned in paragraph 2 above, Dr. Ing Walter Ingenieurberatung (Germany) and Soci6t6 Centrale pour l'Equipment Territoire-Coop6ration (France), have negotiated a contract satisfactory to the Association for execution of the work covered by the proposed credit, and signature of this contract would be a condition of effectiveness of the credit. 13. Total project cost is estimated at $430,000 equivalent. The proposed credit would finance the foreign exchange cost estimated at $380,000. The Government would finance the local expenditures, estimated at $50,000 equivalent. 14. The proposed credit would be refunded out of the proceeds of any future lending which the Bank Group may make for the construction of the project roads. PART IV - LEGAL EISTRUT1ENTS ANUD AUTHORITY 15. The draft Development Credit Agreement between the Republic of Burundi and the Association, the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Associ- ation, and the text of a Resolution approving the proposed Development Credit, are being distributed to the Executive Directors separately. The draft Development Credit Agreement followJs the usual pattern of credit agreements for highway engineering projects. PART V - CCLPLIANCE WITH ARTICLES OF AGREEENT 16. I am satisfied that the proposed development credit would comply with the Articles of Agreement of the Association. PART VI - RECCIv ! DATION 17. I recommend that the Executive Directors approve the proposed development credit. Attachment Robert S. YicNamara President NIay 25, 1970