Burundi - Third Ngozi Integrated Rural Development Project

Document of The World Bank FOR OFFICIAL USE ONLY FILE COPY Report No. P-3149-BU REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF BURUNDI FOR THE INTEGRATED RURAL DEVELOPMENT/NCOZI III PROJECT November 12, 1981 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 Currency Unit - Burundi Franc (FBu) US$1.00 - FBu9O FBul - US$0.011 ABBREVIATIONS BCC - Burundi Coffee Company ILO - International Labor Organization ISABU - Institut des Sciences Agronomiques du Burundi (Burundi Institute of Agricultural Sciences) OCIBU - Office des Cultures Industrielles du Burundi (Burundi Industrial Crop Development Office) RDC - Regional Development Company FISCAL YEAR January 1 - December 31  BURUNDI FOR OFFICIAL USE ONLY INTEGRATED RURAL DEVELOPMENT/NGOZI III PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Burundi Amount: SDR14.2 million (US$16.0 million) Terms: Standard IDA Terms Cofinancing: The project would be cofinanced by a loan of SDR6.25 million (US$7.0 million) from the Interna- tional Fund for Agricultural Development (IFAD), and a loan of US$3 million from the Kuwait Fund for Arab Economic Development CKuwait Fund). Beneficiary: Regional Development Company of Buyenzi (RDC) Relending terms: Grant Project Description: (i) Objectives: (a) to assist smallholders in the Ngozi Province to improve the productivity of the coffee and foodcrop cultivation; (b) to improve rural living conditions by building or maintaining water sources, equipping social centers, developing wood resources and improving the road network; (e) to improve the quality of Burundi's coffee by building new washing stations; and (d) to strengthen the management capa- bility of the RDC. (ii) Components: (a) a program to provide extension services and agricultural inputs; (b) the construction and equipment of 15 coffee washing stations and the strengthening of the maintenance and management of handpulping centers; (c) reafforestation and erosion control measures; (d) improvement of the road and water supply network and social infrastructure; (e) a pilot swamp development program; (f) the construction of marketing warehouses; (g) studies, research, training and Project monitoring; and (h) technical assistance. (iii) Benefits: 75,000 farm families would receive assistance for coffee and foodcrop development. An additional 75,000 families would receive assistance for coffee development only. The expected annual incremental cash income per farmer is estimated to vary between US$15 and US$70. The foodcrop component would result in better nutrition for the families benefitting from it. Project investments would create permanent jobs for the equivalent of about 850 man years, excluding farm labor requirements. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  (ii) During the implementation period, another 2,500 persons would be employed to meet unskilled labor requirements. The reafforestation and erosion component would assist in controlling soil degradation and providing wood for fuel. (iv) i4sks: (a) possible delays in implementation resulting from prohlems in recruiting expatriate and/or Burundian key staff and high staff turnover or slow delivery of materials; and (b) possible weaknesses of extension services with the risk that the technical package might be adopted by the farmers at a slower rate than expected. The Project has been designed to minimize these risks,in particular through flexible annual work programs and a training component to strengthen extension services. Estimated Costs 1/ (US$ Million) Local Foreign Total Extension Services and Inputs 0.85 3.55 4.40 Washing Stations and Handpulpers 1.80 2.50 4.30 Reafforestation & Erosion Control 2.20 0.20 2.40 Rural Road.Network Improvement 0.25 0.50 0.75 Water Supply and Social Centers 0.05 0.10 0.15 Pilot Swamp Development 0.15 0.20 0.35 Marketing and Warehouses 0.15 0.20 0.35 Studies, Research and Training 0.70 0.95 1.65 Technical Assistance - 2.80 2.80 Regional Development Company 1.50 2.00 3.50 Audit - 0.10 0.10 Total Base Costs 7.70 13.05 20.75 Contingency Allowances Physical Contingencies. 0.80 1.30 2.10 Price Contingencies 2.20 3.90 6.10 Total Contingencies 3.00 5.20 8.20 Total Project Cost 10.70 18.25 28.95 1/ Taxes and duties are included in Project costs but are negligible.  (iii) Financing Plan (US$ Million) Local Foreign Total Government 2.9 - 2.9 IDA 4.3 11.7 16.0 IFAD 2.5 4.5 7.0 Kuwait Fund 1.0 2.0 3.0 TOTAL in.7 18.2 28.9 Estimated Disbursements (US$ Million) IDA FY 1982 1983 1984 1985 1986 Annual 1.4 1.4 3.0 5.2 5.0 Cumulative 1.4 2.8 5.8 11.0 16.0 Economic Rate of Return The economic rate of return from directly productive Project components (amounting to about 80% of total Project costs) is estimated at about 26%. Appraisal Report: No. 3230 dated October 14 , 1981 Mp: IBRD 15323   INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF BURUNDI FOR THE INTEGRATED RURAL DEVELOPMENT/NGOZI III PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Burundi for the equivalent of SDR 14.2 million (US$16.0 million) on standard IDA terms to help finance a Rural Development/Ngozi III Project. The Project would also be financed by a loan from the International Fund for Agricultural Development (IFAD) for the equivalent of SDR6.25 million with a term of fifty years including ten years of grace and carrying a one percent administrative charge; and by a loan of US$3 million from the Kuwait Fund for Arab Economic Development (Kuwait Fund) at terms to be determined. SDR13.9 million out of the proceeds of the Credit would be transferred by the Government as a grant to the Regional Development Company (RDC). PART I - THE ECONOMY 2. A Country Economic Memorandum was distributed to the Executive Directors in March 1981. Updated country data are provided below and in Annex I. 3. Background. With an average GNP per capita of about US$200 in 1980, Burundi is one of the poorest countries in the world and is designated as "least developed" by the United Nations. Of a population of about four million, only 90,000 are wage earners; the remainder depend mainly on subsistence agriculture. The Government is facing several critical problems in its efforts to develop the economy: the capability to prepare and manage programs and projects is weak; the agricultural 'labor force is largely untrained; and population growth keeps straining Burundi's productive resources, particularly in agriculture. Despite a stated policy of "spaced births", the problems of population pressure cannot be solved in the immediate future. A major effort must therefore be made to increase agricultural productivity. During the past decade, per capita agricultural production declined steadily. The search for more arable land has caused large-scale deforestation and severe chortages of firewood in the rural areas, which makes the development of alternative energy sources urgent. 4. Shipments of imports and exports through the principal outlets via Tanzania have frequently encountered delays due to bottlenecks in the port of Dar-es-Salaam, underinvestment in the railway link between Tabora and Kigoma (para. 10) on Lake Tanganyika, and losses because of theft. However, action is being taken to make external connections more reliable. The link via Rwanda and Uganda to the port of Mombasa (Kenya) is becoming increasingly attractive with the continuing improvement of national highways between Bujumbura and Mombasa.  - 2 - 5. Government Development Strategy. Since 1977 the Government has designed a new strategy to achieve social justice, ethnic reconciliation and improved living conditions in the rural areas. The poll tax, which was levied on all males, was replaced by compulsory deposits which can be withdrawn after three years. In addition, the traditional obligation for small farmers to provide services to landowners, in exchange for the right to cultivate land, was abolished. Likewise, land which was obtained in an irregular manner for speculative purposes was returned to the State or to the farmers who cultivated it. Other aspects of the new policies, which are embodied in the Third Five- Year Plan (1978-82), are: (a) emphasizing agricultural production to meet the increasing needs for food of the rapidly growing population; (b) increasing the rate of economic growth substantially in order to provide greater employment opportunities and more income to the poorest segments of the population; (c) raising the investment rate significantly; (d) giving the Government a more active role in mobilizing financial and manpower resources, and greater participation in mixed enterprises in the comercial and productive sectors; and (e) fostering decentralization of economic and social activity away from the capital city through the creation of development poles and voluntary settlement of the peasant population in villages. To facilitate the implementation of its strategy, the Government strengthened the role of planning by elevating the planning organization to the rank of Ministry and by giving it a key role in selecting and monitoring public investment. 6. Recent Economic Developments. The period 1977-79 constitutes an important phase in Burundi's economic history, as it witnessed an acceleration of economic growth to an annual average of 4.4 percent, as well as a major effort by the Government to raise the country's investment rate, traditionally among the lowest in the developing world. During this relatively short period, the volume of investment grew by about 75 percent, and the investment rate rose to more than 12 percent of GDP. This effort, which was led and implemented by the public sector, had important repercussions on the pattern of domestic demand, domestic inflation, and the mobilization of domestic and external financial resources. 7. The growth of domestic demand in Burundi accelerated in the last few years owing mainly to high producer prices for coffee during 1976 and 1977, and to the rapid growth of public sector expenditures during 1978 and 1979. Public consumption and investment expanded at a rate almost triple that of the private sector during the period 1976-79. Government expenditures more than doubled in current terms and increased from about 16 percent of GDP in 1976 to 21 percent in 1979. Capital expenditures, particularly for infrastructure and for the financing of public enterprises, contributed most to this growth. The government overall deficit, which increased from about 3.3 percent of GDP in 1976 to 7.3 percent in 1979, was covered to an increasing extent through recourse to the domestic banking system (about half in 1979). 8. The rapid expansion of domestic credit was the main cause of the almost 26 percent rate of inflation in 1979, although rising import prices were also a contributing factor. Owing mainly to high transportation costs, import prices increased by 33 percent in 1979, more than twice the international inflation rate. During 1980, domestic credit did not expand much further, and, in spite of continued inflationary pressures from abroad, domestic inflation has slowed down significantly to about 14 percent.  - 3 - 9. Burundi's external current account registered surpluses in 1976 and 1977 but showed deficits in 1978 and 1979. In 1979, the current account deficit was about US$57 million, equivalent to 7 percent of GDP. Underlying this shift was an adverse movement in the country's terms of trade as well as an unprecedented increase (55 percent) in the volume of imports. Owing mainly to a one-third decline in the volume of coffee exports and a 16 percent fall in the terms of trade, Burundi's current account deficit widened to US$100 million in 1980, equivalent to 11 percent of GDP. The country's growing deficit has been financed mainly with project-related aid to the Government and parastatals from multilateral and bilateral agencies. During 1979-80, these flows averaged US$64 million per annum ( equivalent to 32 percent of Burundi's 1979-80 imports), compared to US$18 million in 1976. By June 30, 1981, Burundi's international reserves still stood at the comfortable level of US$70 million, equivalent to about four months of imports, a legacy of the 1976-77 coffee-boom years. 10. In 1981. the Burundian economy is expected to grow at a rapid pace owing to a resumption of investment activity and exceptional performance of the agricultural sector due to good weather conditions. According to preliminary information, Government investment will increase by 7% in real terms, following a year of stagnation, and the production of rice, beans, maize and coffee will attain record levels. Coffee exports, the major source of foreign exchange for the country, are expected to increase to about 30,000 tons during 1981 if the production can be sold and evacuated. This increase could offset the significant decline in the world market price for coffee which took place during the first eight months of 1981. As a result, the overall balance of payments deficit would be kept this year within the Central Bank's financial capabilities. Transportation remains the main source of uncertainty. Duiring the first semester of 1981, because substantial delays were anticipated in the shipping of coffee through Kigoma to Dar es Salaam, BCC, the Government agency responsible for external marketing, adopted a cautious marketing policy in order to be able to honor the delivery contracts. The transportation bottleneck affects both the balance of payments and credit policy, as it results in longer delays (more than three months) in the repatria- tion of the export receipts and also in larger credit requirements to finance the storage and exports of coffee. Thus far, however, this bottleneck has not critically affected imports of certain strategic items such as petroleum products and cement, which transit through Kenya, Zambia and Zaire. Following a resumption of activities at the Kigoma Port during the month of August, shipments of coffee through the southern route seem to have recovered their normal rhythm. 11. External Assistance, Major Issues and Prospects. Because of the unfavorable outlook for world coffee prices, the medium-term prospects of the economy are not good (coffee exports constitute about 90 percent of Burundi's merchandise exports). According to current forecasts, the price for coffee could fall by as much as one-third in real terms by 1984 as compared to its 1979 level. The impact of this decline in Burundi would have to be absorbed by the small farmers (through lower producer prices in real terms) and by the Government (through lower coffee tax receipts in real terms). Even with a policy of demand restraint, it will be difficult for Burundi to reduce its current account deficit to below 9 percent of GDP. 12. Burundi's future external capital requirements are likely to be much higher than in the recent past. In order to sustain a growth rate of the economy of about 4% p.a. in real terms, medium-and long-term external  - 4 - capital requirements would have to double to an average of about US$155 million p.a. in current prices during the period 1981-84. Although Burundi has been remarkably successful in mobilizing external resources, recently a few high priority agricultural projects have not attracted sufficient financing. The composition of aid flows also would have to be changed, since direct balance of payments support (and/or commodity assistance for essential imports) would have to be provided to a greater extent than before.. 13. Restraining the growth of domestic demand and stimulating the productive sectors would help Burundi obtain needed external aid. This would imply close coordination of policies on several fronts: Government expenditures, the taxation of consumer goods and imports, as well as price policies. Together with the Government's investment program, a more flexible pricing strategy should constitute the cornerstone of a policy to expand domestic production. In recent months, the Government has taken important steps in this direction by raising significantly electricity and water tariffs, domestic transport fares, gasoline retail prices, and by selectively lifting rent controls. The major policy issues outlined above have been the object of discussions between the Burundian authorities and an IMF mission which visited Burundi to continue negotiations started in early 1981 toward an Extended Fund Facility. The mission was able to make progress in defining the scope and contents of a medium-term adjustment program. Negotiations are expected to resume during the next few months. Under current IMF guidelines, Burundi could draw up to SDRl55 million during the period 1982-84, enough to cover Burundi's non- project external financial requirements during those years. 14. Because o; the expected financial constraints, it is highly unlikely that during the period 1980-84 the volume of investment can be much more than half of that envisaged in the Plan. Nevertheless, even this reduced level would still allow the economic growth mentioned above (para. 12) as well as some increase in the investment rate. Also, a lower level of investment would be more in line with the country's implementation capacity. 15. The Government has already taken steps to reduce its investment objectives, but an important issue remains whether the Government will attain its objective of directing investment to the productive sectors, particularly agriculture. Population pressure on available land, and its adverse effects on soil fertility, foodcrop production and nutrition, underlines the urgency of accelerating rural development. The Government recently launched a number of integrated rural development projects which, over the next few years, are expected to benefit an increasing number of small farmers. However, the prepara- tion of integrated rural development projects has been hindered by limited knowledge of intensified cultural practices and of the willingness of small farmers to adopt them. The first major projects, scheduled to begin implementa- tion in 1981, remain in many respects experimental and will have to be comple- mented by adaptive research. 16. Government policy is to establish regional development companies (RDCs) to promote integrated rural development, appropriate technology, village- level organizations, and decentralization of Government services. To this end, the RDCs will manage all agricultural, forestry and veterinary Government staff working in the proposed project areas. These integrated rural development schemes cut across the functions of various ministerial departments. Although the Government expects RDCs to eventually cover part, if not all, of their  expenditures with their own earnings, opportunities to make commercial profits will only develop slowly, and RDCs will probably depend on Government budgetary allocations for a number of years. In spite of this financial dependence, the Government intends to endow the RDCs with full management autonomy. 17. Despite certain successes, a number of parastatals have been affected by inadequate coordination with the central Government, management problems, lack of career incentives for staff, financial weaknesses and, in the case of agricultural parastatals, lack of small farmer participation owing to insufficient incentives. Increasing the efficiency of the parastatal sector constitutes a top Government priority. With IDA assistance, the Government is assessing the situation of the parastatal sector with the intention of providing it with the resources, autonomy and flexibility it requires to achieve satisfactory economic and financial performance. 18. To complement the efforts made by the RDCs, it will also be necessary to promote rural development more actively by stimulating the activities of small and decentralized organizations such as Government-sponsored and private cooperatives as well as private secular and religious groups, and by supporting the communal efforts under the sole political (UPRONA) party. The scope and efficiency of the activities of communes (the basic administrative unit) could be greatly improved by providing more resources to local authorities. Available evidence suggests that these organizations can play a key role as "transmission belts" between the small farmers and the rest of the economy. Rural development projects now face the difficult challenge of combining the vertical integration needed for increasing the production and quality of coffee with the more partici- patory arrangements necessary for increasing foodcrop production and meeting other basic needs. This reconciliation is critical since the satisfaction of basic nutritional needs to a large extent guides the socioeconomic behaviour of the farm family. The scarcity of land is already such that, in a number of regions, farmers face a choice between continuing coffee cultivation and gradually shifting to foodcrop production. 19. If the Government continues to focus on development, pursues improvements in policies and strengthens its administration, it may achieve a steady, albeit slow, improvement in per capita incomes. If mining of Burundi's nickel resources proves feasible, the prospects over the next ten years would be much better. However, the commercial viability of exploiting these deposits has yet to be established. Regional development in Central Africa will also be important to Burundi's economy. In September 1976, Burundi, Rwanda and Zaire signed a convention establishing the "Economic Community of the Countries of the Great Lakes" (CEPGL). The Community, which has its seat in Gi3enyi, Rwanda, aims inter alia at stimulating and intensifying intra-regional trade and cooperation in a wide range of activities. A major objective of the Community is the electrification of the Great Lakes region. The glass container project which was recently approved by the Board of IFC will be the first major regional industry to be implemented under the aegis of the CEPGL. The three countries have set up a joint development bank to finance regional development projects, in particular to exploit methane deposits around Lake Kivu, and to develop a fishing industry around Lake Tanganyika. They have also instructed the Secretariat of CEPLG to investigate ways of improving the transport system around the lakes in order to ease the transport bottlenecks affecting Burundi and Rwanda.  - 6 - 20. In 1977-80, total long-term capital inflows to Burundi amounted to about US$220 million, of which US$90 million (41 percent) was in the form of grants. Most of the assistance has come from the UN agencies, Belgium, the European Development Fund, IDA, the Federal Republic of Germany, and the People's Republic of China. On December 31, 1980, Burundi's external medium and long-term debt amounted to about US$290 million (including undisbursed amounts), of which IDA held 32 percent. Debt service averaged 8.5 percent of export earnings. Owing to the large proportion of grants in external assist- ance, IDA will probably continue to hold a large proportion of Burundi's outstand- ing debt. Notwithstanding the relatively low debt service ratio, Burundi, because of its poverty and the instability of its export earnings, should refrain from borrowing on commercial terms. External aid should therefore be on grant or very concessional terms and should continue to include a substan- tial share of local cost financing. PART II - BANK GROUP OPERATIONS 21. Since IDA lending started in Burundi in 1966, sixteen credits have been made, of which fifteen expressed in dollars, for a total amount of US$92.9 million, and one expressed in Special Drawing Rights, amounting to SDR US$3.3 million. One credit (US$1.1 million) helped improve water supply to Bujumbura; four credits (US$17.3 million) were for agriculture (two for coffee production, one for fisheries and one for forestry); three credits (US$19.4 million, including an engineering credit of US$400,000) helped start a highway maintenance and improvement program; a US$10.0 million credit is supporting the-improvement of primary education and a second one of US$15.0 million finances vocational and tech,ical training; two credits (US$4.0 million) were made for technical assistance; and the National Development Bank received a credit of US$3.4 million. A US$15.0 million credit for an Urban Project aimed at improving the conditions of the poor in the city of Bujumbura and a US$7.7 million credit for a Telecommunications Project became effective in October 1980 and January 1981, respectively. The Second Coffee Project and the Fisheries Project are cofinanced by the Kuwait Fund for Arab Economic Development (US$1.0 million) and the Abu Dhabi Fund (US$1.2 million), respectively. The Second Highway Project is cofinanced by the Arab Bank for Economic Develop- ment in Africa (BADEA) in an amount of US$6.0 million. The Forestry Project is cofinanced with a credit of US$1.2 million equivalent made from the EEC Special Action Account. A credit of SDR3.3 million for a Nickel Exploration Project was signed in July 1981 and is not yet effective. In addition, two credits approved by the Board in FY81, for a Third Highway Project (SDR20.5 million) and a Kirimiro Rural Development Project (SDR16.2 million), have not yet been signed. In June 1981, IFC approved a glass container project (para. 19). Annex II contains a summary statement of IDA credits, notes on projects in execution, and the status of disbursements as of September 30, 1981. 22. Project performance has been hampered by the shortage of local management capacity and technical skills, which is likely to remain a major constraint to development for some time to come. This situation has particularly delayed the execution of the Fisheries and the Second Coffee Projects, although the implementation of the Second Coffee Project has recently improved. Problems encountered in the execution of IDA-financed projects were discussed with the Government during the Second Country Implementation Review held in Bujumbura  - 7 - in June 1980. Recommendations were made in particular regarding the training of local staff, accounting, audits and disbursement procedures. Given existing constraints, however, project performance is, on the whole, satisfactory. 23. Future IDA operations in Burundi will aim primarily at reversing the decline in agricultural productivity, improving the transport and communica- tion network, developing energy resources and strengthening absorptive capacity through training and technical assistance. The Second Technical Assistance Project is assisting the Government in its efforts to improve the planning process and the management of the public enterprise sector. A third technical assistance credit aiming principally at continuing these efforts and assisting in the restructuring of the public enterprise sector is to be appraised in April 1982. A sector mission visited Burundi in May 1981 to determine priority areas in the energy sector. Its report is being prepared. A pilot project to assist the domestic construction industry has recently been appraised and a second credit to tie Development Bank is to be appraised shortly. PART III. THE AGRICULTURAL SECTOR Background 24. Burundi is essentially an agricultural economy relying on subsistence farming and coffee as its main export crop. Over the last few years, agricul- ture has accounted for about 60 percent of the Gross Domestic Product and has provided almost all of the foreign exchange earnings, with coffee contributing about 90 percent and animals skins, tea and cotton making up most of the rest. During the same period, food imports accounted for about 15 percent of the total value of merchandise imports. More than 90 percent of Burundi's population derives its livelihood directly from agriculture and much of the rest is directly or indirectly dependent on it for employment. Agriculture faces the following serious constraints: (a) the scarcity of arable lands and the small size of the farms, problems which are compounded by the high rate of population growth which increases pressure on land; (b) the low level of farmers' income, which limits their ability to purchase fertilizers, pesticides and other inputs; (c) the inefficiency of the Government extension services; and (d) the soil erosion and degradation caused by the cultivation of steep slopes, iradequate anti-erosion measures, burning of agricultural residues and grass, overgrazing, little or no fallow practice and the lack of fertilizer appli etion. All these factors have contributed to a decline in per capita foodc.op production over the last decade and a worsening of the already poor nutritional standards of most of the rural population. 25. By law, all land belongs to the Government but in practice tenure is regulated by a combination of traditional laws and modern regulations. Under the traditional system, individuals are granted usufruct rights over land and own all the crops produced on that land. These rights are usually hereditary. Uncultivated land belongs or automatically reverts to the Government. However, to expropriate cultivated land, the Government must pay compensation.  - 8 - 26. There are an estimated 650,000 farming units, with the average farm size below one hectare. In coffee areas farmers typically allocate no more than ten percent of their land to coffee, and the rest to foodcrops. About half of the farming is done by women. Farming tools are rudimentary and limited mainly to hoes for digging up the ground and machetes for cutting grass. Few farmers use pesticides or fertilizers. In addition to being the mainstay of the subsistence economy, foodcrops represent the most important source of money income for farmers. Export crops, mainly coffee and to a lesser extent cotton and tea, provide about 20 percent of rural cash income. 27. About one quarter of the farmers raise livestock. Cattle are bred extensively, more for prestige than for economic and nutritional reasons. The herd size is estimated at about 800,000 head of cattle. In addition, there are some 600,000 goats, 300,000 sheep and about 35,000 pigs. Given the rapid decline of grazing lands, the competition between grazing and cultivation for the same land in many areas and the deeply ingrained social attitudes which affect the way people raise cattle, it is urgent that the Government define a national livestock policy. The proposed Project would finance a study to analyze the livestock subsector and to assist the Govern- ment in establishing a national livestock development policy (para. 54). Annual fish production has varied between 12,000 and 21,000 tons in recent years. Yields could be significantly increased in Lake Tanganiyka and there is a potential for developing fish ponds. Burundi's forests occupy about 3 percent of the country's total area and are being rapidly depleted. 28. Modern agricultural techniques are used: (a) in the settlement schemes called "paysannats"; (b) in industrial plantations; and (c) in irrigation schemes. Settlement schemes were started in 1949 to transfer people from the densely populated central plateau area to the sparsely populated lowlands. To date, settlements cover about 40,000 ha and produce crops such as cotton, rice and sugar cane. Industrial plantations of ro- busta coffee are privately owned and cover an area of about 800 ha; they produce about 75 percent of Burundi's robusta coffee. Industrial planta- tions of tea cover about 4,630 ha and belong to the Government. 29. Because of the limited quantity of surplus production, inadequate storage and the lack of organized marketing facilities, only 5 to 10 percent of total foodcrop production is marketed by private traders in traditional markets. Foodcrop prices are determined principally by supply and demand, and vary from region to region. In 1977, the Government established a parastatal marketing company (SOBECOV) in order to stabilize food prices and supply. This company has had so far little impact and is experiencing financial and management difficulties. Marketing cooperatives are supported by religious missions or by the Government. The major problems faced by the cooperatives are lack of trained personnel, insufficient working capital and inadequate or non-existent infrastructure. A project financed by the International Labor Organization (ILO) in the Ngozi province is successfully addressing some of these problems. Producer prices for export crops are set by the Government and marketing is regulated by the relevant public company (para. 34).  -9- The Coffee Sub-Sector. 30. About 95 percent of Burundi's coffee is of the Arabica variety grown exclusively by smallholders. The main smallholder coffee growing areas are Ngozi, Gitega and Muyinga provinces; Ngozi provides over one third of total production. Most of the production is exported. Mainly due to weather, Burundi's coffee production and exports fluctuate greatly. Annual production of green coffee has varied between 17,000 and 23,000 tons in recent years. Coffee husbandry standards vary, but mulching could be much improved in general. Although there are no reliable data, it is estimated that yields are low, and have been generally decreasing except in the area of the two IDA-financed coffee projects. About three quarters of the coffee crop is still pulped by hand on the farms and most of the rest is pulped at some 325 handpulping centers. Because of frequent breakdowns, the productivity of these centers is low. About 4 percent of the coffee is processed in washing stations built under two IDA Credits (para. 40). In general, coffee quality suffers from indiscriminate picking, poor processing and drying, and inadequate storage and hulling. 31. Parchment coffee is sold by farmers directly to private traders licensed by the Government-controlled Industrial Crop Development Office (OCIBU), or to the washing stations. For the most part, private traders are independent businessmen who have developed strong economic ties with the local population and lend money to farmers during the off-season. Parchment coffee is transported to Bujumbura and delivered to OCIBU for hulling, grading, packaging and sale to the exporting company (BCC) (para. 34) at a set price. Producer prices of parchment coffee and coffee cherries are set before the beginning of each season by the Government in relation to the expected export price. The Government guarantees the purchase of all coffee presented for sale during the coffee season. In recent years, this pricing policy has guaranteed a satisfactory minimum price to the farmers, and provided the Government with an important source of revenue after contributions to a Stabilization Fund (whose purpose is to protect producer prices from export price variations). Although the level of coffee prices received by farmers represents a reasonable proportion of import prices, it is expected that the price level will become a major issue in the future in view of: (a) relatively high domestic inflation, (b) increased cost of inputs; (c) declining international coffee prices (para. 32); and (d) the possibility of competition between coffee and foodcrop cultivation. It was agreed during negotiations that IDA and the Government would exchange views each year on Government policy relating to coffee production (Section 4.07 of the draft Development Credit Agreement). 32. Burundi's coffee exports represent about one half of one percent of world exports. Over 60 percent of Burundi's semi-washed coffee is sold in the United States. The small quantities of high quality fully washed coffee produced so far have been sold on the European market. Coffee demand from importing countries is expected to increase by 2.5 percent a year during the next decade. Prices in 1977 constant dollars averaged $3.18/kg in 1978 and are expected to decline gradually to $1.85 in 1983 and then to increase progressively to $2.30 in 1990. These projections are to be taken within the context of crop uncertainties and of the practice of some  - 10 - exporting countries to grant discounts in return for a guarantee to purchase an agreed volume. Investments in washing stations under the proposed Project (para. 49) would allow Burundi to supply quality coffee which would be sold at a premium price. The six-year International Coffee Agreement, which became effective on October 1, 1976, provides for the introduction of export quotas when prices fall below a specified level. Burundi's export quota for the 1980-81 coffee season was set at 24,000 tons, which, as had been the case for the preceding years, was higher than production (para. 30). Burundi is also entitled to a production increase of 5% per annum. The estimated incremental coffee production for the proposed project falls within this range. Agricultural Services 33. The Ministry of Agriculture and Livestock is responsible for direction and coordination of all activities in the agricultural and live- stock sector. It operates through three General Directorates, for Planning, Agriculture and Livestock. Agricultural services are regionalized with most departments represented at the level of "arrondissements" (which is the intermediate level of administration between the provinces and the conmunes). The Ministry of Rural Development was created in 1979 to take over the responsibility of rural housing, water supply and electricity, and cooperatives. Both Ministries are understaffed. Most of the Government recurrent budget for agriculture, representing only 3 to 5 percent of the total recurrent budget in the past decade, finances the central services of the Ministries. Extension services are fragmented among the Ministry of Agriculture, parastatal organizations and various projects and, in most cases, are weak. 34. The three parastatals dealing with the main export crops (coffee, cotton and tea) are basically supply and marketing organizations. The coffee organization, OCIBU (which has been the executing agency for the First and Second Coffee Improvement Project, financed by IDA) is primarily concerned with ensuring that Burundi coffee quality is in accordance with internationally recognized standards. It also establishes and maintains communal coffee hand pulpers and washing stations; imports, distributes and supervises the use of pesticides, fertilizers and other coffee-related inputs and administers the Coffee Stabilization Fund and a Coffee Promotion Fund. OCIBU also controls internal coffee marketing and operates four hulling factories. OCIBU's resources come from taxes levied on coffee exports and from loans and grants from Government. Coffee export is the responsibility of the Burundi Coffee Company (BCC), a parastatal under the Ministry of Commerce and Industry. 35. Agricultural research is carried out by the Burundi Institute of Agricultural Sciences (ISABU). Due to lack of staff and equipment, ISABU has so far been unable to assign personnel exclusively to coffee research. Burundi has four secondary level agricultural institutes from which about 170 agronomists, veterinary technicians and field assistants graduate each year. Women have recently been admitted to these institutes for the first time. The Agricultural Department at Bujumbura University produces about a dozen graduates per year. Although almost all the graduates of these institutions are employed by the Ministry of Agriculture, their number is still not sufficient to meet the country's needs for trained agricultural manpower and a heavy input of expatriate technical assistance is required.  - 11 - 36. Agricultural credit is not well developed in Burundi. The Banque Nationale de Developpement Economique (BNDE), created in 1967, is the only source of medium-term agricultural credit, but such credit represented only 10 percent of its loans outstanding at the end of 1978. The lack of a nationwide network, the high risks involved given the small size of farms and the farmers' low incomes, and the lack of trained staff are the main obstacles which have prevented BNDE from becoming an effective vehicle of rural credit. Commercial banks finance seasonal working capital needs of traders but do not extend credit to farmers who are considered too high a risk. A new financial institution (CAMOFI) was established in 1979 to provide financing for development projects implemented by public enterprises; its role in rural development projects, however, has been so far quite limited. Under financing from the Second Technical Assistance Project (para. 23), the feasibility of establishing an agricultural credit institution is being reviewed. Government Objectives. 37. The Government's third Five-Year Economic and Social Development Plan (1978-82) declares agriculture as the priority sector. The Plan's main objectives are soil protection, food self-sufficiency, import substitution (wheat, sugar, tobacco, wood), expansion and diversification of exports (sugar, quinine, fruits and vegetables), development of livestock and fishing, arresting deforestation, and increasing the return on existing investments. The Plan aims, by pursuing these objectives, to raise rural incomes, improve nutrition, settle young couples in less densely populated areas, and improve rural social and cultural services. Rural areas are to benefit from 57 percent of total investment (22% of direct investments and 35% of related infrastructure). Because of the constraints mentioned above (para. 33),it is, however, estimated that less than 50 percent of the plan objectives were met during the period 1978-80. Moreover, investments in the agricultural sector are being implemented more slowly than investments in other sectors. 38. To achieve the Plan objectives, the Government is encouraging the creation of cooperatives (para. 29), and is establishing Regional Development Companies (RDC), which would integrate Government services in a single organization, under independent management (para. 16). The RDCs are financially autonomous legal entities, whose sole equity owner is the Government. They are essentially public service institutions and their commercially oriented activities are expected to be limited in scope. Their investment and operating costs will therefore be mostly covered by Government subsidies. The RDCs' main function is to become gradually responsible for all rural development activities including the delivery of agricultural inputs and the implementation of specific projects financed either by the Government or by external donors. The management of coffee washing stations and of handpulping centers is also to be transferred from OCIBU to the RDCs. To date, five RDCs have been created. IDA Operations in the sector. 39. Four IDA Credits have been made for agricultural projects (para. 21). In addition, the Second Technical Assistance Credit finances the services of experts to assist the Ministry of Agriculture in the identifica- tion and preparation of new projects, in the start-up, monitoring and evalua- tion of ongoing projects, and in the establishment of a data collection  - 12 - system on agricultural production. Overall project implementation has been satisfactory although the provision of budgetary funds has been a recurrent problem and the fisheries project has encountered some difficulties (Annex II). 40. The First Coffee Improvement Project (Ngozi I) has been completed. The principal objective of the project, which was implemented from 1969 to 1976 under the responsibility of OCIBU, was to increase coffee production and improve the quality of coffee grown by about 44,000 smallholders in the Ngozi region. The Project included the following components: (a) strengthening of extension services; (b) distribution of fertilizers, other inputs and tools to farmers; (c) construction and operation of four washing stations and rehabilitation of handpulping centers; (d) fertilizer trials; and (e) repair of bridges on access roads. The Second Coffee Improvement Project (Ngozi II) which started in 1976, was to continue the activities started under the first project and to develop foodcrop production. It also included experimental rural development activities, including the improvement of small livestock, the use of water mills and the establishment of farmers' cooperatives. The project is nearly completed. A Project Completion Report on the Ngozi I Project was issued in September 1976, a Project Performance Audit Report in March 1977, and an Impact Evaluation Report on February 2, 1981. 41. The main conclusions of these reports are that in the absence of reliable data, it is impossible to assess the impact of the Ngozi I Project on the increase in coffee production. Staffing and procurement problems also delayed and seriously hindered project implementation. Incre- mental income was estimated at less than US$10 dollars per farm household at full development. Implementation of the Second Project has also been affected by many problems, including (a) a high turnover of both expatriate and local management staff (b) lack of an adequate supply of construction materials due to transport difficulties; (c) a weak and inefficient extension workforce as well as lack of management follow-up in foodcrop development which resulted in a relative failure of the foodcrop component; and (d) delays in availability of Government counterpart funds and absence of prefinancing mechanism for working capital needs. The achievements of the Project to date include: (a) the construction and better management of the washing stations as a result of the recruitment of competent managers and the growing confidence of the farmers in them; (b) a well-run cons- truction service which has been able to construct buildings and repair roads at acceptable standards, much below prevailing market prices; (c) the establishment and maintenance of coffee nurseries throughout the Project area. 42. Detailed reviews of the first project and a preliminary review of the second underline a number of important lessons. They include: (a) Data Base - A more reliable data base and better monitoring of Project activities are essential for assessing the Project impact; (b) Socio- Economic Environment - It is important to understand the relationships between farmers, traders and extension workers in the Project area and the factors that are likely to influence their behavior; (c) Management  - 13 - and Organization - The general shortage of trained manpower in Burundi and the weakness of the extension services make it important to assess the training needs of the Project staff and take appropriate measures to satisfy them. It is also important to ensure staff continuity. Finally, the technical package to be extended to the farmers must be understood by extension workers and they must be able to communicate it to the farmers; and (d) Prices - Participation of the farmers and the success of the develop- ment programs depend on appropriate prices being paid to farmers for their coffee. These lessons have been taken into account in the design of the proposed Project, in particular through: (a) provision for a monitoring and evaluation system that would ensure adequate data collection (para. 56); (b) the emphasis put on training (para. 55) and the reduction of the Project's scope and complexity; (c) provision for a periodic review of coffee prices to producers (para. 31); and (d) the establishment of a prefinancing mechanism (para. 60). PART IV. THE PROJECT 43. The proposed Project was appraised in July-August 1980. Negotia- tions were completed in Washington in October 1981. The Government delegation was led by Mr. Sabimbona, Ambassador of Burundi in Washington. A detailed description of the Project components can be found in the Staff Appraisal Report (No.3230-BU), dated October 14, 1981, which is being distributed separately to the Executive Directors. The main features of the Project are highlighted in the Credit and Project Summary at the beginning of this report. Special conditions of the Credit are summarized in Annex HIT:. The Project Area 44. The Project area would be the province of Ngozi, which has a surface of about 2,700 km2, a population of about 700,000 (17% of Burundi's population), and a density of about 260 inhabitants per km2, which makes it the most densely populated region in the country. The area is made up of rolling hills with intensely cultivated slopes and marshy, often peaty, flat valley bottoms. Its altitude varies from 1,500 to 2,200 m. Soils are mostly deep and well drained, but large sections on steep slopes are subject to serious water erosion. Their production potential varies from average to good. The area has a relatively dense road network; most roads are passable during the rainy season. Objectives and Description of the Project. 45. The main objective of the proposed Project, which would be the third agricultural development project in the Ngozi Province (para. 40), would be: (a) to assist smallholders to improve the productivity of coffee and foodcrop cultivation; (b) to improve the quality of exported coffee; and (c) to improve rural living conditions by building or maintaining water sources, equipping social centers and developing wood resources to be used as fuelwood, building poles and timber. By establishing a new RDC (paras. 55-57) and strengthening its management capability through training and technical assistance, the project would also contribute to institution building.  - 14 - 46. The Project would be implemented over about five years and would include the following components: (a) a program to provide extension services and agricultural inputs; (b) the construction and equipment of 15 coffee washing stations and the strengthening of the maintenance and management of handpulping centers; (c) reafforestation and erosion control; (d) improvement of the rural road network, water supply and social infrastructure; (e) a pilot swamp development program; (f) the construction of marketing warehouses; (g) studies, research, and Project monitoring; (h) training and technical assistance; and (i) establishment of the RDC which is to implement the Project. 47. Extension Services and Provision of Inputs. Existing extension services would be developed and strengthened through recruitment of additional extension workers, on-the-job training of existing and new workers and provision of continuous training through refresher courses. The extension program for coffee would include the distribution of inputs, principally fertilizers, pesticides and improved seeds, the setting up of a network of demonstration plots, continuation of the teaching of coffee husbandry techniques, which have already improved in the Project area as a result of the first two coffee projects (paras. 40-42), and the training of farmers in erosion control and pesticide application measures. The foodcrop farming program would be simple and would focus on improved seeds, fertilizer use, seeding, spacing and weeding techniques, and disease and insect control. 48. Government policy on the import of inputs, in particular fertilizers, and their pricing to farmers has not been consistent in recent years; this has resulted in variable and insufficient levels of imports to satisfy demand. Under the Project, inputs would be sold at cost to farmers, (exclud- ing the distribution cost of the RDC), except pesticides and fertilizers. Pesticides would continue to be supplied free of charge in the context of nationwide campaigns. As for fertilizers, at the present time they are obtained in small quantities through external aid programs and sold to farmers with a subsidy of about 25%; pending the definition of a new fertilizer policy, this level of subsidization would be maintained for the time being. However, systematic surveys would be carried out under the Project monitoring system to gather and interpret data which would assist the Government in defining a fertilizer policy; it is expected that by the end of Project year 3 these surveys would have yielded sufficient information for this purpose. The Government would make available to the  - 15 - RDC the funds, including foreign exchange, necessary to meet the recurrent annual needs for fertilizers and pesticides (Section 4.08(b) and (c) of the draft Development Credit Agreement). In the context of the definition of the fertilizer policy referred to above, attention would be given to devising a pricing policy for fertilizers which would aim at gradually increasing the RDC's revenues, in particular through the introduction of a margin to cover the RDC's distribution costs. This matter would also be reviewed during the annual exchange of views which is to take place between the Government and the Association on policies related to coffee production (Section 4.07 of the draft Development Credit Agreement). 49. Washing Stations and Pulping Centers. The purpose of the washing stations component would be to improve the quality of processed coffee from semi-washed to fully washed, a grade which attracts a higher price in the international market. In addition to the construction and equipment of 15 new stations, the Project would finance training of Burundian nationals at all levels for their operations. The management of the washing stations and of the handpulping centers, now under OCIBU, would be transferred to the RDC. A technical committee would be set up by December 31, 1981 to define the technical operating norms of the washing stations and handpulping centers and monitor the RDC's compliance with them (section 5.05 of the Draft Development Credit Agreement). 50. Reafforestation and Erosion Control. The objective of the forestry program would be to provide fuelwood, poles and timber which are in very short supply. About 2,500 ha of land not used for other cultivations would be planted witlh trees. Seedlings would be produced by the RDC and supplied to the farmers at cost. When appropriate, the Project would utilize nurseries of the on-going forestry project. The erosion control program would consist of the planting of anti-erosion hedges on individual holdings, controlled burning and controlled grazing on communal land, and tree planting. 51. Socio-Economic Infrastructure. Although the road network is relatively well developed (para. 44), access roads must be built and some improvements are necessary to facilitate the shipment of coffee from the washing stations by heavier trucks. The road improvement component, which would be carried out by force account by the RDC, would consist of construction of about 30 bridges and 30 km of new access roads and maintenance of the most frequently utilized roads (140 km). Secondary roads maintenance would continue to be carried out by the communes through community labor. The maintenance of the existing water supply system would be improved and new springs and wells developed. Financing would be provided for the construction of about 1,000 water sources. The project would also help improve the efficiency of existing social centers through staff training and provision of badly needed transportation means. This component would be implemented by the Ministry of Labor and Social Affairs. The proposed expenditures to carry out this component would be included in the Annual Work Program (para. 56).  - 16 - 52. Pilot Swamp Development. The pilot swamp development program would seek to improve dry season farming in valley bottom lands, explore the feasibility of rainy season cropping and study the potential for exploita- tion of valley bottoms and peat lands. If the pilot Project produces favorable results, it could be usefully replicated in other parts of the country. 53. Marketing Warehouses. To assist the cooperatives in their efforts to improve the marketing of foodcrops in the Project area (para. 29), 10 warehouses would be built and equipment would be provided. The selection of warehouses to be built would be reviewed by the Board of the RDC and proposals would be included in the annual Work Program (para. 56). 54. Studies, Research, and Project Monitoring. Funds for the prepara- tion of studies, research, training and project montoring are included in Project costs. As indicated above (para. 27), the Project would finance studies to assist in establishing a national livestock policy and to prepare projects related to livestock development. In cooperation with activities financed under the Kirimiro Project, the Project would also support the ISABU coffee and foodcrop research program. Proposals would be made by the RDC to ISABU concerning the orientation of research activities and submitted to IDA for approval in the annual work program. The RDC would operate two foodcrop research stations in collaboration with ISABU. Following a preliminary study of farm production systems, yields, use of inputs, and marketing in the Project area, a Monitoring and Evaluation system would be established. A representative sample of farmers would be randomly selected and would serve as a reference to evaluate the impact of the Project. Data would be collected by extension workers under the supervision of the expatriate extension and training specialist (para. 55). 55. Training and Technical Assistance. The objectives of this program would be to establish and develop the management capability of the RDC, to train the existing extension staff, to reinforce the management of the washing stations, and to improve the maintenance and supervision of the hand pulping centers. Fellowships for the training abroad of RDC and Burundi Coffee Company staff would also be financed. Internationally-recruited technical assistants would be required to strengthen the RDC management capability and to train local staff. They would include an extension and training expert for about 48 man-months; a washing stations manager for about 48 man-months; an accounting and finance manager for about 48 man- months; a bacteriologist for coffee research for 48 man-months; a topographer for six man-months; a construction specialist for 48 man-months; a draftsman for three man-months and a land use specialist for 48 man-months. The total cost of the technical assistance component would be US$2.8 million excluding contingencies. The Government is in the process of recruiting technical assist- ance with financing under the Project Preparation Facility. The terms of reference, qualifications, experience and terms and conditions of employment of the specialists and consultants would be satisfactory to the Association and these specialists would be given the necessary authority to carry out their responsibility, pursuant to their terms of reference. The draft contracts, including terms of reference, would be submitted to the Association for its review and concurrence prior to their signing (Section 4.02 (a) (b) and (d) of the draft Development Credit Agreement).  - 17 - Project Implementation. 56. The Buyenzi Regional Development Company (RDC), which was legally established in March 1981, would implement the Project (para. 38). The Project would finance the construction, equipping and maintenance of the RDC's headquarters and of one training center. Responsibility for the day-to-day Project implementation would be vested in the RDC manager. Under the ongoing Ngozi II Project, a specialized department created within OCIBU and headed by a qualified Burundian national was responsible for Project implementation. This department would be detached from OCIBU and become the nucleus around which the RDC would develop. The head of the Department has become the RDC manager. The staff employed under the ongoing Second Coffee Improvement project would be transferred to the RDC. The Project would be implemented on the basis of annual work programs and budgets prepared by the RDC. The annual work program and budget would be submitted each year to IDA and IFAD for comments before its revicw by the Board of Directors of the RDC. Following its adoption by the Board, it would be transmitted to IDA, for approval, by the Minister of Agriculture, with his coments (Section 4.06 of the draft Development Credit Agreement). Submission of the First Work Program and Budget would be a condition of effectiveness of the Credit (section 7.01 (e) of the draft Development Credit Agreement). For each year, communication to IDA and IFAD of a satis- factory work program would be a condition of disbursement against activities for that year (schedule I, para. l(b) of the draft Development Credit Agreement). 57. The governing bodies of the RDC are the Board of Directors and a Management Committee. The Board of Directors is chaired by a representative of the Minister of Agriculture (who is now the chairman of OCIBU) and includes the representatives of the Ministers of Planning, Economy, Finance, Social Affairs, Trade and Industry, Rural Development, the Government of the Ngozi Province, a representative of farmers and a representative of cooperatives in the area. The Board of Directors is responsible for ensuring that Government development policies are implemented through the RDC. The responsibilities of the Board are: (i) RDC policy making; (ii) review and approval of the RDC annual work programs and annual investment and operating budgets before their submission to the Minister of Agriculture; and (iii) review and control of RDC performance. The Management Committee comprises the Manager and his deputies and could include representatives of farmers in the area, as determined by the Board of Directors. The Govern- ment would inform IDA sufficiently in advance of any planned changes in the composition of the Board of the RDC (section 4.03 of the draft Develop- ment Credit Agreement). 58. The RDC would comprise the following departments: Accounting and Finance, Agricultural Services; Training and Extension; Construction, and Technical. During Project implementation, these departments, except for the Agricultural Services Department which would be headed by a qualified Burundian already in post, would be headed by internationally-recruited experts (para. 55) working closely with key Burundian staff. The Burundian staff would gradually assume more responsibilities and eventually replace the expatriates. To ensure satisfactory Project implementation, a sufficient number of Burundian staff would be hired in addition to the technical assistance team. Under the statutes of the RDC, the RDC manager and his deputies  - 18 - are appointed by the Chief of State on the basis of proposals from the Minister of Agriculture. The terms of reference of all key Burundian personnel, were discussed at negotiations, and it was agreed that: (a) IDA would be consulted on all appointments to these positions; and (b) the Government would consult IDA before making changes in these positions (section 4.04 of the draft Development Credit Agreement). In order to retain qualified Burundian staff, the RDC would establish a compensation plan which would offer adequate incentives to its staff, in particular by providing for merit allowances (Section 4.10 of the draft Development Credit Agreement). The appointment of the RDC manager, the agricultural services manager, the training officer, and the chief accountant would be a condition of Credit effectiveness (section 7.01 (c) of the draft Development Credit Agreement). Project Costs and Financing. 59. Total Project costs are estimated at about US$28.9 million, of which about US$18.2 million or 63% represents foreign exchange costs. Taxes and duties are included in Project costs but are negligible. The costs are incremental and do not include salaries for the existing extension work force but they include the RDC's operating costs during the period -f Project implementation since the RDC's establishment represents a Project cost. The Project would be financed by an IDA Credit of SDR14.2 million '-3S$16 million). The Credit would be made available to the RDC in the form of a grant (section 4.05 of the draft Development Credit Agreement). The Credit would finance about 55% of total Project costs, including the equivalent of US$4.3 million of local costs, which is justified given the very limited financial resources of Burundi (para. 20). IFAD would jointly finance the Project with IDA through a loan of SRD6,250,000 equivalent (US$7 million) representing about 24% of total Project cost. The Kuwait Fund for Arab Economic Development would extend a loan of US$3 million representing about 10 percent of Project costs, on a parallel basis. The Government of Burundi would finance about 10 percent of Project costs. The Association would be the Administrator of the IFAD loan. The IDA, IFAD and Kuwait Fund loans would be linked by cross-effectiveness conditions (Section 7.01 (a) and (b) of the draft Development Credit Agreement). 60. The Government counterpart funds would be made available to the RDC on a quarterly basis; each irstallment, which would represent one- fourth of the yearly estimated contribution, would be deposited in the RDC Central Bank account no later than the end of the first month of the quarter (Section 4.08 (b) of the draft Development Credit Agreement). Deposit of the first installment would be a condition of Credit effectiveness (section 7.01 (f) of the draft Development Credit Agreement). After Project completion, Government would have to contribute about US$1.2 million per year to the operating costs of the RDC, mainly to cover the cost of extension services and road maintenance. Under the Ngozi II Project, the Project Unit is borrowing from local commercial banks to prefinance the operating costs of the washing stations and meet seasonal credit needs. Under the proposed Project, the Government and the RDC would sign an agreement with the National Bank for Savings and Investment (CAMOFI), according to which CAMOFI would provide a line of credit to the RDC, sufficient to prefinance the expenditures of the RDC under the proposed Project. Repayment of the  - 19 - principal amounts and interest due under this agreement would be guaranteed by the Government. (Section 5.04 (b) of the draft Development Credit Agree- ment). The signing of this agreement as well as the provision of the Govern- ment guarantee through a "lettre d'aval" would be a condition of effective- ness of the Credit (section 7.01(h) of the draft Development Credit Agreement). Procurement 61. Contracts exceeding US$100,000 for the supply of fertilizers and pesticides (about US$3 million including contingencies) would be awarded on the basis of international competitive bidding in accordance with Bank/IDA guidelines. Contracts for inputs, materials, tools, vehicles and equipment other than washing station equipment (about US$3.6 million) costing less than US$100,000 individually would be awarded on the basis of Government procurement procedures, which are satisfactory, with the provision that quotations would be sought from all suppliers represented in Burundi and offering adequate guarantees of service and supply of parts (schedule 3(C) of the draft Development Credit Agreement). To ensure continuity in operations, and facilitate maintenance, the machinery and equipment to be procured for the washing stations (about US$1.2 million) could be purchased directly from existing suppliers provided that adequate justification for the award of the contract was furnished to the Association. Construction of staff housing, training facilities, offices, warehouses, roads and bridges would be carried out by force account in accordance with procedures acceptable to the Association (schedule 3(C) of the draft Development Credit Agreement). Disbursement 62. The Kuwait Fund would disburse on a parallel basis against the following items: vehicles, motorcycles and bicycles (US$1.0 million); rural roads network (U.S.$1.0 million); warehouses (US$0.5 million); and pilot marshland development (US$0.5 million). Disbursements under the IDA credit and the IFAD loan would be made jointly, with IDA disbursing 70 percent for each item and IFAD 30 percent, on the following basis: (a) 100% of foreign and 90% of local expenditures for incremental expenditures for fertilizers and inputs; (b) 100% of foreign expenditures and 90% of local expenditures for equipment, other than vehicles, motorcycles and bicycles; (c) 90% of total expenditures for civil works; (d) 90% of total expenditures for operating costs of Project implementation: (e) 100% of foreign expenditures and 90% of local expenditures for technical assistance; (f) 100% of foreign expenditures and 90% of local expenditures for studies, research and training; and (g) 100% of foreign expenditures and 90% of local expenditures for studies to assist in establishing a national livestock policy and to prepare projects related to rural development (upto US$220,000 and 90,000 respectively). IDA would finance 100 percent of the advance made under the Project Preparation Facility. Disbursements against (a), (b) and (e) would be fully documented. Disbursements against (d), (f), and (g) for local expenditures would be made against statements of expendi- tures certified by the RDC director and the administrative and finance manager. For each year, communication to IDA and IFAD of a satisfactory work program would be a condition of disbursement against activities for that year (para. 56).  - 20 - Accounts and Audits 63. The RDC would maintain records and accounts adequate to explain all Project activities. These accounts and would be audited by independent auditors acceptable to IDA and would be submitted together with the auditor's report to the Association within six months of the end of each fiscal year (Section 5.01 (c) of the draft Development Credit Agreement). Communication to IDA of the audit of the accounts of the Ngozi II Project, for which independent auditors acceptable to IDA have recently been recruited, would be a condition of the effectiveness of the Credit (section 7.01 (g) of the draft Development Agreement). Benefits and Risks 64. An estimated 75,000 farm families would receive assistance for coffee and foodcrop development over four and a half years. A further 75,000 would benefit from assistance with coffee development only. The annual incremental cash income of an average farmer in Project Year 10 is expected to vary between approximately US$15 and US$70. Project investments would create permanent jobs for the equivalent of about 850 man years at various levels, excluding farm level labor requirements. During the implementa- tion period, another 2,500 persons would be employed to meet unskilled labor requirements. 65. The economic rate of return (ERR) from directly productive Project components, i,presenting about 80% of Project cost, is. estimated at about 26%. The cost.- of the pilot swamp program, studies and trials were not included in the analysis, as benefits from these activities are difficult to quantify and would accrue principally in future projects. The economic life of the Project has been assumed to be 20 years. Foreign exchange costs and benefits were valued at a premium of 20% over the official rate to reflect more accurately the scarcity of foreign exchange. Economic rates of return for the coffee and foodcrop development, the washing stations and the hand pulping centers were estimated at 28%, 30% and 11%, respectively. No separate rate of return was calculated for the reafforestation and erosion control, the water supply and social infrastructure, the marketing warehouses, or the improvement of roads and bridges because of the difficulty of quantifying, in a satisfactory manner, the benefits from each of them. If Project costs were to increase by 20%, the ERR would decrease by four to five percentage points. If crop yields or prices were to decrease by 20%', the ERR would decrease by the same amount. If farmers' adoption rates were to decrease by 20% and costs were simultaneously to ncrease by 20%, the ERR would become 16%. If all benefits were delayed one year, the ERR would become 21%. The main risks facing Project implementation are possible delays :n recruiting expatriate and/or Burundian key staff, slow delivery of materials, hig> staff turnover, and possible weaknesses of the extension services (with the r sk that the technical package might be adopted by farmers at a slower rate than expected), and lcier than expected yield improvements. Although the proposed technical package is simple and fits with current farming practices, farmers' adoption rates would be partly a function of the efficiency of the extension services and mainly a functio*n of the financial  - 21 - rewards farmers would get if they participate in Project activities. The Project has been designed to minimize these risks. Training is a major Project component and should help improve the quality of extension services. As for farmers' incentives, farm budgets indicate that farmers' incomes would increase substantially as a result of the application of the proposed technical program. With regard to yields, the sensitivity analysis shows that the rate of return is not unduly sensitive to yield drops (para. 65). As a first step toward solving the problem of staff turnover, a consultation covenant, as well as a provision for a new compensation plan, are included in the Development Credit Agreement (para. 58). V - LEGAL INSTRUMENTS AND AUTHORITY 67. The draft Development Credit Agreement between the Republic of Burundi and the Association, and the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement are being distributed to the Executive Directors separately. 68. Special conditions of the Project are listed in Section III of Annex III of this report. The additional conditions of effectiveness of the proposed Credit are as follows: (a) employment of key technical assistants and key Burundian staff (paras. 55 and 58); (b) establishment of the Buyenzi RDC, with statutes satisfactory to the Association (para. 56); (c) signature of the Pre-financing Agreement, guaranteed by the Government (para. 60); (d) submission and IDA approval of the annual work program and budget for the period September 1981 to December 1982 (para. 56); (e) Deposit by the Government of the first quarterly install- ment (para. 60); (f) audit of the Ngozi II Project accounts (para. 63);and (g) all conditions precedent to the effectiveness of the IFAD loan and all conditions precedent to initial disbursements under the Kuwait Fund Loan, except for the effectiveness of the IDA Credit Agreement, have been fulfilled (para. 60). 69. I am satisfied that the Proposed Credit would comply with the Articles of Agreement of the Association.  - 22 - PART VI - RECOMMENDATIONS 70. I recommend that the Executive Directors approve the Proposed Credit. A. W. Clausen President Attachments Washington, D.C. November 12, 1981  ANNEX I - 23 - Page 1 of 5 BURUNDI - SOCIAL INDICATORS DATA SHEET LURUNDI REFERENCE GROUPS (WEIGHTED AVEtA0ES LAND AREA tTHOUSAND SQ. KM.) - MOST RECENT ESTIMATE)!! TOTAL 27.8 MOST RECENT LOW INCME MIDDLE INCOME AGRICULTURAL 17.1 1960 /b 1970 /b ESTIMATE /b AFRICA SOUTH OF SAMARA AFRICA SOUTH CF SAHARA GNP PER CAPITA (US$) 50.0 90.0 i18.0 i 238.3 794.2 ENERGY CONSUMPtION PER CAPITA (KILOGRAKS OF COAL EQUIVALENT) Il.O/c 11.3 17.3 70.5 707.5 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THOUSANDS) 2851.0 3350.0 4022.0 URBAN POPULATION (PERCENT OF TOTAL) 2.2 2.2 2.3 17.5 27.7 POPULATION PROJECTIONS POPULATION IN YEAR 20O0 (MILLIONS) 6.5 STATIONARY POPULATION (MILLIONS) 17.0 YEAR STATIONARY POPULATION IS REACHED 2135 POPULATION DENSITY PER SQ. KM. 102.6 120.5 144.7 2-7.7 55.0 PER SQ. KM. AGRICULTURAL LAND 168.8 208.6 230.6 73.7 130.7 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 42.5 43.8 41.9 44.8 46.0 15-64 YRS. 54.6 53.2 54.8 52.4 51.2 65 YRS. AND ABOVE 2.9 3.0 3.3 2.9 2.8 POPULATION GROWTH RATE (PERCENT) TOTAL 1.6 1.6 2.0 I 2.6 2.8 URNAN 1.6 1.6 2.4 Al 6.5 5.1 CRUDE BIRTH RATE (PER THOUSAND) 46.8 44.1 45.3 46.9 46.9 CRUDE DEATH RATE (PER THOUSAND) 26.5 24.2 22.3 19.3 15.8 GROSS REPRODUCTION RATE 3.0 2.9 2.9 3.1 3.2 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. USERS (PERCENT OF MARRIED WOMEN) .. .. FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 103.0 100.0 104.0 89.5 89.9 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 91.0 98.0 97.0 90.2 92.3 PROTEINS (GRAMS PER DAY) 56.0 61.0 60.0 52.7 52.8 OF WHICH ANIMAL AND PULSE 28.0 30.0 30.0 17.8 16.1 CHILD (AGES 1-4) MDRTALITY RATE 41.0 36.0 32.8 27.3 20.2 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 37.2 39.5 41.8 45.8 50.8 INFANT MORTALITY RATE (PER THOUSAND) .. 140.0 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. .. .. 23.9 27.4 URBAN 77.0 94.0 55.0 74.3 RURAL .. .. .. 18.5 12.6 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOIAL .. .. . 26.2 URBAN .. 96.0 95.0 63.5 RURAL .. .. .. 20.3 POPULATION PER PHYSICIAN 96566.7 55833.3 45020.0 31911.8 13844.1 POPULATION PER NURSINC PERSON 6768.7 7494.4 6180.0 3674.9 2898.6 POPULATION PER HOSPITAL BED TOTAL 877.6 744.4 .. 1238.8 1028.4 URDAN 27.3 113.4 .. 272.8 423.0 RURAL 3723.1 1074.9 ,. 1745.2 3543.2 ADMISSIONS PER HOSPITAL BED .. HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL .. .. URBAN RURAL .. .. 5.0 AVERAGE NUMBER OF PERSONS PPF ROOM TOTAL ., URBAN .. RURAL .. .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. MIAN ** RUIRAL .. .. ibe following figures reflect the most recently available data: 1/ 200.0 2/ 2.2 3/ S.0  ANNEX I - 24- Page 2 of 5 BURUNDI - SOCIAL INDICATORS DATA SHEET BURUNDI REFERENCE GROUPS (WEIGHTED AVER/AGES - MOST RECENT ESTIMATE)- MOST RECENT LOW INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b AFRICA SOUTH OF SAHARA AFRICA SOUTH OF SAHARA EDUCATION ADJUSTED ENROLLMENT RATIOS l/ PRIMARY: TOTAL 18.0 27.0 21 0 - 56.4 73.7 MALE 27.0 37.0 26.0 - 70.7 96.8 FEMALE 9.0 18.0 17.0 3/ 50.1 79.0 SECONDARY: TOTAL 1.0 2.0 3.0 4/ 10.0 16.2 MALE 1.0 3.0 4.0 5/ 13.6 25.3 FEMALE 1.0 1.0 2.0 6/ 6.6 14.8 VOCATIONAL ENROL. (2 OF SECONDARY) 35.0 24.0 12.0 7/ 8.0 5.3 PUPIL-TEACHER RATIO PRIMARY 36.0 37.0 33.0 46.5 36.2 SECONDARY 15.0 12.0 16.0/d 25.5 23.6 ADULT LITERACY RATE (PERCENT) 13.9/c .. 25.0 25.5 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 0.9 1.1 1.3 2.9 32.3 RADIO RECEIVERS PER THOUSAND POPULATION 20.0 19.4 27.6 32.8 69.0 TV RECEIVERS PER THOUSAND POPULATION .. .. .. 1.9 8.0 NEWSPAPER ("DAILY GENERAL INTEREST-) CIRCULATION PER THOUSAND POPULATION .. 0.1 0.3 2.8 20.2 CINEMA ANNUAL ATTENDANCE PER CAPITA .. .. .. 1.2 0.7 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 1495.2 1676.8 1923.9 FEMALE (PERCENT) 45.6 45.2 44.4 34.1 36.7 AGRICULTURE (PERCENT) 90.0 87.0 84.1 80.0 56.6 INDUSTRY (PERCENT) 3.0 4.0 4.9 8.6 17.5 PARTICIPATION RATE (PERCENT) TOTAL 52.4 50.1 47.8 41.7 37.2 MALE 58.3 56.0 54.1 54.3 47.1 FEMALE 46.9 44.4 41.7 29.2 27.5 ECONOMIC DEPENDENCY RATIO 0.9 0.9 1.0 1.2 1.3 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS .. .. HIGHEST 20 PERCENT OF HOUSEHOLDS .. .. LOWEST 20 PERCENT OF HOUSEHOLDS .. .. . .. LOWEST 40 PERCENT OF HOUSEHOLDS .. .. POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. 213.0 136.0 381.2 RURAL .. .. 136.0 84.5 156.2 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. .. 99.1 334.3 RURAL .. .. 37.0 61.2 137.6 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 55.0 39.7 RURAL .. .. 85.0 68.8 Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, betweea 1969 and 1971; and for Most Recent Estimate, between 1976 and 1979. /c 1962; /d 1975. The following figures reflect the most recently available data: May, 1981 1/ 25.0 2/ 30.0 3/ 20.0 4/ 2.5 5/ 3.4 6/ 1.6 7/ 13.0  - 25 - ANNEX I DFNT OPSO SOCIA~L INDICATORS Page 3 of 5 Noe:Althouh thedat ar rn rm nte eerlyjde the -n-ho-it-tive and reliable, titoi loh oe ta hympntbeitr natioe-iycosponhbIe becueo. hehc-fstoidad deimitione nnd --npeyn .ned by differet -ontte ocoiien the da. hdtaesno- theles.a,. usfol eo d...ribe erdern of wagnitoda, indictol te-dn, and ebareo-eio oseta in nae dlffeoe..ocrn.. . The ea Icno grooPIae (1)I the sane country. gronp of the -bj ett co-neyand () coontry grou ilth -o-ht ihe vrge Income elan nbh -octry geno stoctraaffinities). In the- refeenc grou dat the anrneea popa.into neighted nitioi neane f...each-td1toon h ny when maeity of the onnthe inA grobadaafothatIniao. Sinme the coeeg fcotr tnaco h odit_uor deyono hev nnIlab ihY of daro and Ianonofne Ianntemoane ..emiaed Inrlating-gaveregu ifntodi--tonoanohe.- Tbetenoerg- -eeolyceatulfconi etegheoa1.ceof LANDl ARIA (eb..s.ed aq.kn.) '.totme_o) B0 hd-ttlohr a.roh -fopulatlor (total, Tnrni - Totitr-s1 encee gn o urea and tilnodnllyetar. ur- ,noI ot dols h..... _pooot.. Iten f hosyituh bdel Aglimu1tu-1 - Eariote of agrI_olena ronr eperi orI yI ruoney_ouiooi to yolt n rvt._tr o yhnledhaio foo -mpe, pant-e, narhet and kitchen gdedsn -e to IeI fohion; 1978 data. hobhi-i-ainoo H-. mpilth urn encllhn -n-eno tly staffod GNP PER CAPITA (USI - G P I, ~ ~ ~ ~ ~ ~ hyat eon no_ hnito. Esthh, nn.prooct-g yv1ttipallynt- CDt ER APIT (P)) An pe -oPito estimates nt coret aket prce, - dta1 -ar are 00 ot-lodod. Ro-1 h-epiclol, hce.er, locicdc health coineed byaoeovmno ehod ea Wotid took Atlas (i977-79 bonis); 1960, nod edi - eI rr to yar..acently stoffad hY o phynicine (hot by i9N70, ond 1979 dont.. nein uttr ou.edle t. hich off-o Ir-ainace da-lon nod yro-o a iiooted ro.g of tmedico) foocieo o tto tNERGY CONStORTION PER CAPITA -onlcneoyInof oanc io seeny (colt_iccoo ronhsloeiooeOh othul gcri hosyicaho. and ltgote. aroenn gntnoe guad hydr-,nnlseodoeotere-elroI-- nndr...allorp-tta 11 Ialnroc -opitoulaaonus.dnalandautrot trinity) in icilog-n of oooh eqoi-iont per -epit.; 1960, 1970, ord 1979 cetr. d3p:ennliodhnyti ceo trlodd onyone rtl deta. Adnianiona per Sos- el Red. Totl nI_ber of ndm.iaion oo dinch-rgess Aeon huuyitlr7,' Id,Ldd by tb rnghe of bnde. POPUITLAION9 AND PITAL. STATISTICS eTal. Pnepl1re., fftd-Yer (thousan ds) - An of July 1; 1960. 1970, aed i979 HOUSING llchnePepoition (ercen of toai( -Ratio of orban to tota .poylanton; A honahlid c--i-t of n gmop of tntidiilt1 eh. aloe liolog quaners dhffeesn defientioss of urban oroa na feecoymbty o uaedAteetl eat hotd n_.e ldger 'ty or nay nor be ieolded In ..agoaths h91e91 n 17 an b h.neod froa ierolynps PeenlaJ-tion Pmeb-deJons byaae, uhrc eno e coo -el ubebn, and rura - Aveag P a by Idhrya 11 arn pplto pcennt r ae o 9Ohr fpros e o o i cu, e ne ocpe gneena toa tpplato byaeadsead theirA notltadenitrta eilna opctey eiigentdrnpeosetntru Projecton pormetersfor mortaity ra-s noeProis of tree eisasae- nobn-ted ure level, and female lit eeapemtasty erahitheing at.li, 77. yer.ltl, The tpur Cdn-cinoo. l du]lnswtleetiiye Ilvn ucee speetg matereifoefertilt-y eabits alsohar theeleel aehnein dent1n to. of.. total Pra,en uA l nI Idenrtptnoy tesiyPorig oinoe ee andpat fami ly. pinnin tperirmnme.. t ILIontr isnen assigne one of theeteIh, natn foraht IITO andfetiit trnd Ae eentonpop ies AdjuBsted iEolenot atio teetoner f-tnlntiole-Iatationgey pooainter nn rneeic rmayuho. oo) aend eae-Con oa,n and fel the birt cats isediItg hedat rt,tn o te g el,le g- totaotoZaldgs tth riar evlatpccrtgitfreprtI estimated nothe hosia Id the proectd chroerai fte ouato Ince acne , pool are belo oraboe -ptheotimel_ siolae in 1~the yyear leOR ad th cue f ecin offeriltytees en. re-lntoa-UCTInONdrsho -tn,mtendfne-Cepsdnne;mody nmt level. r p-.... dj-t orqtcau rtrCt erso pcne rmc itcci leti ..tel ioneetf onultin in. tea-hsd P-Pbs iyea theme Jtt.nyyplea rvdageen,vctoa,o eme teno stotosb oi ehe has~ been rearbedh. d tnenotly..thiof.P12 to t egr tag;cereodeocuse r esel Parolation lemeity-_I..ncluded.I total area 19ff, 190 and 197 data. inlode teohicol, indettial, o other prgrams nteth operat_ledepsed Per en ha. aciculural lnd - Cmpare Ifesunfoet agiutra.eden..rondp.ne fseodr insttutons ony;190 1970 asd 1919t data. ..t PnlI-eseoheeraIo- cleco nde 11naY -d- T tal l st :enseiled6 Is Pc .nlatton Age tarnoe ..s fe gt) - Chiden ft-l."PP years) mrin-ag (11-. poiar odj ntoodafy difnel t divided by puh _m y ofoscec n h -A yars) aId rtired.J (IF tersen p ovjet) al.t IIrne ofmi-yarppo hrrepoioibves l_Ion J9. 191,ad 1909 e fdii.I f,ii t doto. _adolt - literac rosa ( beeent) b ittete. adolts. f _hrto rendsa rie Iauahn eehttefeontthoa -Ana got aenc oalmdIdpemnos fttladl voltn gd 5yan n or yang peolotios for 9Sf-hi,1991-7, endC9.,-_d Paeuatin Ioet Rat (rrrot)s lerhad - Th.nFel growt eatros, of urba pPo- CeIf.TI istiana far 1950-hi. 196i-71, and 1970-79. Peensoger Cart feet thatunond noruintiom) - massager cers competes maineI. pl.vd . g-e.1 Ice irasnerdctC Rt-Aeag tnne ofdauhesgoae bear in. ilhrnsdrstnehine 1 iaca.tnttei ad oyear e -reiserarIitn tidtp-d be-soml epocte perio .dpifablepeienasprset eg-eei- i Per-I. get ens inefeo d aptat f ere-cn yerIaynthItmaahsao tilny' rate.; usn0ely fireyea d vraet enin.i tT, 97, nd179 nstocrrssblths oIeig Pam.ly _lAnruna-Annetor. ape nuelt fChilsds) 0-1dane y osb. r of amkospere TI tsmetvlyer d oer -dyt lveludandd bynaia)-I r-oivee Ifn -rhadoeIe to P6miy P..anaine - la esd (6r5ena marrie wnmgd pe-tPee ng of mareted p.p.atie no.dL i ae hncgiiaino Oneswsi fst woe fnId- daen g f11 i-ltpns h s ithmneldvnenoNwnrCrnuin peta o Loe-letien) (hame the average nile- C_edocBtih efalfodcaoiis Pedutesnlde se ed ed n e trkes sol durig th ya, inludn d...n o rv-n ha "Iin nclna erbss esaiiete es od (e.g.t anguerais and mobilll,ilitty ehnitle. intaC f ae)whc r edible And cotain nonrbi..n.d (e.g Inf-se,,R endies(D,t .. P111, l ye f . -.f .i tan as anelaed). Agregat peoutia bf oo nntyisbasdtn ASP.iC pasiotil average pr9d70e pIme aI ge;16-5 91 n 197 ddn.otl.dcabor P Bee f Ina -' ine Idol aciv perona icluding Pee9 capisdactneely of mlonies (cercnt of reuieens .- Copteil reare Sfernies.: end unuplaye hotie IunludIng I hoseivs studeneI, eto energy rqoivlentigf get fod supplie avaiabl in... oP oery .9peeifitafl hoeringJ populatio oft ef- ge... etinitionys.. in redone bl nntissar car day. .. Aalale sopplies1 ...mpeta doaetn ronnion, imprt 1aortnnaal;16,17 n 979. . ele I1hd . data. npree ae cAngs- in AtnI. Retlb Auple -good -ebma Ifed seede,-PeTV "imseer -~ fme lpoboc force TV peretag of-tta labor f.t quyntiRissuned ...in fod ronaio,, ed lose. i dise trigotIfn heqire-I hoiutoce (pe Ico yt) - hbn frceginfati-g IfoTVeaty, hsIng Wend mane weriedetmtdb A an n hso ia sd o -oeaL.cr- fsbag t eemntge ftoa lao oc;If, 1971 ad p1979 dan.l vity nd halthtansderig snieoemntaltempeatne, bdy wights agelndote i portnt). labo boiron t in . mining cost-oIor, It Iufset.ordtg FO ed nAN itiDino oplto,adalnng1 em o ae atTITgndt be lererteiry, ent er. end gas . aspecetage o toaI lbefoc; 90 handnethild erl; 196-65 1970 l. ned tto-I . 1977 data. 197R an 1979 deritto. .,i.ld. ..i.. .di.i i- nicent n ft grams. of tona prigteis per1 fey end 20 grm. fane nd16,17,d 1979 data. . I,~KC Ths non. ihed on ti0e poetic tlnterte edarloer, the .ibe of7 en tttlpnen n )gasoIe siaesoefo ainlenc anl=Pimal .1pesi neoneeeg foe nbe I aol-,ropse by C.pAtited ThOrd bnesctponyRto-Rti of,"i, pou -siouner1 end 65 aad n orl dyPoo tuvey 196165,197. an 1 97I I e.e ihe total labor7fdos. rived iteem uniadle n dnssigrm per.. day 196-6.l 1970 ndi 197 date.. AlCfI hIo-lThIRLOTfIlt.ft ig, ,h.t. tries -t daa teivedfro liCeO t...a 19d 1970y nedi. 1979 data,-- ti of hoknasod.1P ,-.g f-1I lft;i 117 99d gRaL ty d ePthO..IdRiTOtp- TAR Lb. flc iTi t n-btttPtf c- Lif Eueotnm ait.igirth (rasIf ceoenme ofp ptenrs of11i. life. rtnanin The fl taning y, -mtee . are ver ppramte..tg mIfne oft. povery fl.evels6, et irh; d.1960,1y1970 and 1.1979ata and e7bdould9 be7 interrtdwthcnieabemuin IsaeMraity at (erithouand) -d - Annl eath ofinfn oeroeya OntmatdeAenlerIfvreyle-maLevl ( llre cf ia)-eb1edrra donea Ifo f-afIa Watr ceen of opp plyti If enrol Irhan and rua.. f5 ~ oeiinlyaone itpe nern ro-fodeeuiemnt in oat b I to.pIce toal iuba, n rurabl) ithdyUD reasonab e ne tol safe nfet.ordaldle1..pj.i. f lE. water . tf6 S- supply.(.ocndes erant" dnrice ates o unrete but oonai"notd n960imat7d Readv Poverty Te. l.b..d. IncLOevl(tOcr .aia .-iurbantied neal - peee Ptaiee of fth ir chse 10El hm I papolationt Th.. C a rhnrfapbrpcteligtgowof th -ottry. trhee leveltie. dond freeti. the md cosdsrAld as being wtbir I 7 raaale too of that1 boose. Is 2 enrol grea tat-m ted e P erflott-o bal ..eont Povert oLvlfreet ra rsaoahl Ace woul implyg that the 1 .- ha ..nie o eber uFAI the Toshald an?ua- enaeo aooine (I ha andI.. rural) eb are "absolute do nt.hv Pltoispend-s fl dipopriosned ppar f tbrdytoi feerhle the.d liveaet fnmost .iacosald pgr ento mauaIon -1961m6, 1r9an and mea 7-.. peroentegas21 of1 th c epe ie oulton.Leo d-hspnsal t may .incldei e-..I l I- bt I h.dk. e.vdb ih the oliamio and dts indai I iob or1 eitau esatment, 1 d..lpig5.l..l,l~e of0bpmaenorstpfcanemi n2 d p-tona ban p.livtigipo 6eeaio Ce Phsma P9 po97 In divided by number-d of prCcticibng p_yit- mIass qualifiedt p-t ... )- f--- aicleoolaIvdnrbsIty iae.ft.Idl..yl S$I tpi)-lb .dlt1 Ponain re- thIn....g PIIso -b oultondvietyhobe f rctn sale and. Sfemalegra noest eune t,pra tirlnsa abd -sIstn nurses. b...p..t t.-lvlI t. -- lee e. ht  26 ANNEX I Page 4 of 5 ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1980 ANNUAL RATE OF GROWTH (%, constant prices) US$ Mln. % 1970-75 1975-80 1980 GNP at Market Prices 920.0 100.0 0.9! 3.1' 1.8-Y Gross Domestic Investment 127.7 13.9 6.6 12.1 -4.2 Gross National Savings 27.7 3.0 Current Account Balance -100.1 -10.9 Exports of Goods, NFS 72.7 7.9 3.7 -5.7 -35.6 Imports of Goods, NFS 208.3 22.6 8.0 5.7 -8.6 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1980 Value added US$ Mln. % Agriculture 436.3 49.1 Industry 141.2 15.9 Services 223.1 25.1 Other 2/ 88.6 9.9 TOTAL 889.2 100.0 3 GOVERNMENT FINANCE Central Government - (BuF Million) Percent of GDP 1980 (P) 1980 1976-78 Current Receipts 12,715.6 14.3 14.8 Current Expenditure 10,848.2 12.2 11.2 Current Surplus 1,867.4 2.1 3.6 Capital Expenditures 7,736.0 8.7 8.0 External Assistance (net) 3,695.0 4.6 3.6 MONEY, CREDIT AND PRICES 1975 1976 1977 1978 1979 1980 (Million BuF outstanding at end period) Money and Quasi Money 3544.4 5220.9 8233.2 9411.2 11452.7 10619.7 Bank credit to Public Sector 1271.6 1125.0 270.8 1660.8 4150.4 4177.7 Bank credit to Private Sector 997.0 1532.2 1886.9 4491.3 6220.4 6864.4 (Percentage or Index Numbers) Money and Quasi as % of GDP 10.8 13.2 16.8 17.0 16.1 13.3 General Price Index (1970=100) 153.1 163.6 174.6 216.4 272.1 310.2 Annual percentage changes in: General Price Index 15.8 6.8 6.7 23.9 25.7 14.0 Bank credit to Public Sector 41.7 -11.5 -75.9 513.3 149.9 0.7 Bank credit to Private Sector -60.3 53.7 23.1 138.0 38.5 10.4 NOTE: All conversions to dollars in this table are at the average exchange rate prevailing during the period covered, 1/ Growth rates calculated on the basis of GDP at factor cost. 2T} 9-Net indirect taxes and subsidies. 3/ Consolidated statement of Government finances. (P) Preliminary  - 27 - ANNEX I Page 5 of 5 ECONOMIC INDICATORS BALANCE OF PAYMENTS MERCHANDISE EXPORTS (Average 1977-80) 1977 1978 1979 1980-/1 (Millions US Dollars) USS Mln Z Export of Goods, NFS 96.3 71.4 111.9 72.7 Coffee V5.2 91.1 Imports of Goods, NFS 94.7 123.4 192.9 208.3 Cotton 2.1 2.5 Resource Gap (deficit - -) 1.6 -52.0 -81.0 -135.6 Skins 0.7 0.8 Tea 1.8 2.2 Interest Paymen:s (net) -0.6 -0.9 -1.3 -3.9 Workers' Remittances .. Other Factor Payments (net) -13.1 -13.6 -8.9 -8.3 Net transfers 29.0 32.7 34.3 47.8 All other commodities 2.8 3.4 Balance on Current Account 16.9 -33.8 -56.8 -100.1 Total 82.6 00.0 Direct Foreign Investment - - - - EXTERNAL DEBT, DECEMBER 31, 1980 Net MLT Borrowing Disbursements 18.9 20.2 41.7 46.7 US$ Mln Amortization 3.5 2.6 2.7 2.3 Public Debt, incl. guaranteed 108.2 Subtotal 15.4 17.6 39.0 44.4 Non-Guaranteed Private Debt Capital Grants 13.8 20.9 25.4 31.1 Total outstanding and Disbursed Other Capital (net) -0.3 -24.6 -4.3 24.6 Other items n.e.i. 0.2 3.2 -6.7 - Increase in Reserves (-) -46.1 16.7 3.4 DEBT SERVICE RATIO FOR 1980 Gross Reserves (end year) 21 95.9 83.4 92.7 92.9 Public Debt, incl. guaranteed -l- Net Reserves (end year) 86.0 69.3 65.9 65.9 Non-Guaranteed Private Debt Total outstanding and Disbursed Fuel and Related Materials Imports of which: Petroleum 5.6 6.7 12.6 25.0 Exports of which: Petroleum - - - - RATE OF EXCHANGE IDA LENDING, September 30. 1981 U' D IDA (Amount expressed in US$ Million) - Through Feb. 1973 Since May 3, 1976 US1I.00 - BuF 87.5 US5l.00 - BuF 90.0 Outstanding and Disbursed - 44.1 BuF 100 - USS 1.14 BuF 100 - US$ 1.11 Undisbursed - 48.6 Outstanding including Undisbursed - 92.7 From March 1973 to May 2, 1976 (Amount expressed in SDR million) UST1.00 - BuF 78.75 BuF 100 - US$ 1.27 Outstanding and Disbursed - - Undisbursed - 3.3 Outstanding including 33 Undisbursed 1/ Preliminary estimates. 2/ Central Bank 3/ Ratio of Debt Service to Export of Goods and Non-Factor Services. not available - . non applicable September 11, 1981  - 28 - ANNEX II Page 1 of 6 STATUS OF BANK GROUP OPERATIONS IN BURUNDI A. STATEMENT OF BANK LOANS AND IDA CREDITS EXPRESSED IN US DOLLARS (as of September 30, 1981) Amount US$ million Loan or (less cancellations) Credit Number Year Borrower Purpose Bank IDA 2/ Undisbursed One loan 1/ and five credits fully disbursed 4.8 9.8 - 593-BU 1975 Burundi Second Coffee - 5.2 0.24 Improvement 626-BU 1976 Burundi Fisheries Development - 6.0 2.88 679-BU 1977 Burundi Education - 10.0 0.06 731-BU 1978 Burundi Development Bank - 3.4 2.04 773-BU 1978 Burundi Second Highway Project - 14.0 4.48 917-BU 1979 Burundi Second Technical Assistance - 2.5 1.20 918-BU 1979 Burundi Forestry - 4.3 3.30 976-BU 1980 Burundi Second 15.0 12.91 Education - 1049-BU 1980 Burundi Urban Development - 15.0 13.88 1058-BU 1981 Burundi Telecom- munications - 7.7 7.61 Total 4.8 92.9 48.60 of which has been repaid 4.8 0.2 Total now held 0.0 92.7 Total undisbursed 0.0 48.6 1/ Extended in 1957 to the Belgian Trust Territory of Ruanda-Urundi for the improvement of the Bujumbura-Muramvya road and the expansion of the Lake port of Bujumbura. The loan which was guaranteed by the Kingdom of Belgium has been fully reapid. 2/ Prior to exchange adjustments.  - 29 - ANNEX II Page 2 of 6 B. STATEMENT OF IDA CREDITS EXPRESSED IN SDR 1, (as of September 30, 1981) Amount in SDR Million Credit - Number Year Borrower Purpose Original Undisbursed 1154 2/ 19o1 Burundi Nickel 3.30 3.30 Exploration Total now outstanding 3.30 3.30 Total now held by IDA 3.30 Total undisbursed 0.0 3.30 1/ Two credits were approved by the Board for a Third Highway Project (SDR20.5 million) and a Kirimiro Rural Development Project (SDR16.2 million) in April and June 1981, respectively, and are expected to Be signed shortlv. 2/ Not yet effective. C. Statement of IFC Investments Amount in US$ Million Type of Year Obligor Business Loan Equity Total 1981 Verreries du Glass container Burundi 4.65 0.78 5.63 Total gross commitments less cancellations, terminations, repayments and sales 4.65 0.78 5.63 Total commitments now held by IFC 4.65 0.78 5.63 Total undisbursed 4.65 0.78 5.63  - 30 - ANNEX II Page 3 of 6 D. Projects in Execution 1/ as of September 30th, 1981 Credit No. 593-BU Second Coffee Improvement Project: US$5.2 million of December 5, 1975; Effective Date: October 31, 1976; Closing Date: September 30, 1981 The Project is a continuation of the First Coffee Improvement Project (US$1.8 million Credit No. 147-BU of April 11, 1969). It is being co-financed by the Kuwait Fund (US$1.2 million) on a parallel basis and by Belgium (about US$600,000). The Kuwait Fund has financed the construction of coffee washing stations and of the road construction component, and Belgium assists in the carrying out of a coffee research component. The project is designed to support the development of coffee and food production by strengthening and expanding extension services and distribution of agricultural inputs; it includes a pilot rural development program to improve livestock and food crop production. Start up of the project was slow because of frequent changes in foreign and local project staff. Following the appointment of a new team of experts and of a new Burundian manager, project management improved. Coffee extension work is showing favourable results. Husbandry methods practiced by coffee growers continue to improve and coffee research activities are making satisfactory progress. Construction of twelve washing stations has been completed. The results of the coffee processing component are very satisfactory due to efficient management of the washing stations and the fact that farmers have started to pay greater attention to quality aspects of coffee production. The pilot food crop development program has encountered difficulties. The project is nearly completed. However, to allow for completion of the construction program, the Closing Date will be postponed to April 30, 1982. Credit No. 626-BU Fisheries Development Project: US$6.0 million of June 11, 1976; Effective Date: February 22, 1977; Closing Date: June 30, 1982 This project is designed to increase the production of fish through the provision of training, equipment and materials to fishermen and to improve the distribution of fish throughout Burundi. The project also includes financing for the preparation of rural development plans for the coastal region along Lake Tanganyika and the implementation of pilot development activities. The project is cofinanced by a US$1.2 million loan from the Abu-Dhabi Fund. Project implementation was initially very slow because of problems encountered in the recruitment of both expatriate technical assistants and their national counterparts and in the procurement of goods. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the understanding they do not purport to present a balance evaluation of strengths and weaknesses in project execution.  - 31 - o-'mEX TT Page 4 of 6 Some of these constraints have been overcome and the pace of project implementation has accelerated. Production of a limited number of fiberglass hulls for fishing boats has begun and there has been an improvement in the catch rates at some fishing centers. A new experiment is underway to use low quality local wood and a minimum amount of foreign exchange to produce longer lasting and cheaper laminated wood baots. Problems of shortages of spare parts for the outboard engines are being solved. Contracts for all the studies have been signed and all of them are underway. However, SUPOBU's activities related to commercialization and marketing of fish have been unsuccessful, causing severe financial strains on the Company. Further to a review of implementation problems with the Government, it was decided to stop all processing and marketing activities except for high value frozen fish, and limit SUPOBU's role to the provision of fishing craft and gear and extension services. Credit No. 679-BU Education Project: US$10.0 million of April 28, 1977; Effective Date : September 1, 1977; Closing Date: March 31, 1983. In line with the reform of primary education in 1973, the main objectives of the Project were to develop primary education in rural areas, and in particular to introduce practical subjects in the curriculum and the local language as the medium of instruction. The project included (a) construction and equipment of 100 Multi-purpose Learning Centers (MLCs) - to be utilized by primary school students and the local community at large - and of a practical subject teacher training center; and (b) provision of equipment and technical assistance to the Rural Education Bureau, which is responsible for the implementation of the reform, as well as for teacher training. As a result of a shortage of cement and fuel caused by the hostilities in Uganda in 1979, project execution has been delayed by about a year. Because of this interruption and of higher than anticipated price increases, the Project is encountering high cost overruns. The construction of 21 MLCs, a teacher training center and a printshop has been completed. Due to high cost overruns, and changes in project scope which included the establishement of a construction unit, and an enlargement of the scope fo the works for the teacher training center and the MLC workshops, only about 50 MLCs will now be built. Funds are nearly totally disbursed. Credit No. 731-BU Development Bank Project: US$3.4 million 30, 1977; Effective Date: March 27, 1978; Closing Date: March 31, 1983 The Project aims at providing funds for investment in medium size productive entreprises and technical assistance to the National Economic Development Bank (BNDE). Implementation of the Project started slowly. Following, however, an amendment of the Credit Agreement of June 1980, which allows the use of upto US$1 million for financing loans to small-scale enterprises, project execution has accelerated. The newly established Industrial Development Unit of BNDE which is to promote and appraise industrial projects is now fully staffed.  - 32 - ANNEX II Page 5 of 6 Credit No. 773-BU Second Highway Project: US$14.0 million of March 29, 1978; Effective Date: July 27, 1978; Closing Date: June 30, 1982 The project finances the paving. of a major nation road, Bujumbura-Rugombo (65 km), the start-up phase of an improvement program for selected secondary and tertiary roads and bridges, the construction of a new central laboratory, the strengthening of the mechanized maintenance brigade and the provision of technical assistance and equipmetn for the ongoing maintenance program. Project implementation, in particular major road construction, was delayed by the lack of cement and fuel supplies due to disruption in international transport through neighbouring countries during the first half of 1979. Since then, works have resumed satisfactorily. Because of these interruptions, and of higher than expected price increases, the project is encountering high cost overruns. The improvement program for selected secondary roads is proceeding satisfactorily. The construction of a new central laboratory is nearly completed. The mechanized maintenance brigade is fully operational and has received all the equipment financed under the project. The technical assistance component is, in general, meeting its objectives; however, difficulties in recruiting local counterparts and in retaining them in service once trained have not made possible the reduction of expatriate technical assistance as planned. Credit No. 917-BU Second Technical Ashsitance Project; TJSt2.5 million of June 1, 197Q; Effectiveness Date: September 27, 1979 Closing Date: December 31, 1982 This project provides for the further strengthening of the Government's planning mechanism and its project preparation and implementation capacity. It includes continuation of the technical assistance to macroeconomic planning at the Ministry of Planning, provision of experts to the planning divisions of the Ministries of Agriculture and Industry and financing of feasibility studies. The credit is also financing consultant services to support the Government's effort in restructuring public enterprises. Most of the experts have been recruited. Project implementation is satisfactory. Credit No. 918-BU Forestry Project: US$4.3 million and US$1.2 milion EEC Special Action Credit of June 1, 1979; Effectiveness Date: October 22, 1979; Closing Date: March 31, 1985 This project assists the Government in initiating the first stage for a long-term program to develop basic forestry services and plantations to supply fuel wood, building poles and timber and to establish long-term wood production and marketing policies. The project includes the establishment of rural nurseries in 30 communes, a 2,000 ha eucalyptus plantation and a 5,000 ha pine plantation, technical assistance (provided by France) and financing of energy studies. The three expatriate technical assistants (project manager, two silviculturists) are in post. The project is progressing satisfactorily.  - 33 - ANNEX II Page 6 of 6 redit No. 976-BU Second Education Project: US$15.0 million of April 23, 1980; Effectiveness Date: July 21, 1980; Closing Date: June 30, 1985 The project assists the Government in training middle Level technicians and skilled workers in industrial trades and secretarial-administrative skills. It includes the construction, furnishing and equipping of two new boarding technical schools, a Mechanics Department and a Typist and Bookkeeper Training Department in two existing schools and staff h'ousing. The Credit became effective on July 21, 1980 and implementation is ?rogressing satisfactorily. C''redit No. 1049-B Urban Development Project: US$15.0 million of June 24, 1980; Effective Date: October 31, 1980; Closing Date: December 31, 1985 This project seeks to redress the most urgent -'afrastructure deficiencies in Bujumbura neighbourhoods while laying the j'oundation for more efficient future growth. Essential improvements to street, Irainage, water and public lighting networks will improve living conditions for il8,000 persons in Bujumbura, or 85% of the population. Serviced plots and A.oans for house construction will be made available to families between 15th ;-nd 65th income percentiles. An artisan promotion component will provide :echnical and financial assistance to masons, carpenters, tailors, and raetalworkers. An energy assistance program will improve the efficiency of charcoal-burning metal stoves. A municipal services component will strengthen -he capacity of the Bujumbura municipality to collect garbage and maintain streets, drains and public buildings. Project start-up is progressing siatisfactorily. Street and drainage improvements are underway in the first upgrading neighbourhood and at the Kwijabe serviced site. Artisan 1rainer-promoters have begun providing assistance to carpenters and ietalworkers. Households to receive serviced plots at Kwijabe will be selected on November 1981; those chosen for the first phase of occupancy will begin construction in early 1982. C- ?dit No. 1058-BU Telecommunications Project: US$7.7 million of August 7, 1980; Effective Date: January 7, 1981; Closing Date: June 30, 1985. The project is a major component of the country's 1980-84 it-'restment program for telecommunications. It aims at improving the quality of e)-::sting services while extending the coverage to rural areas and segments of the. population presently unserved. It would also strengthen the management of telecommunications parastatal company (ONATEL) in order to establish the company as a financially autonomous entity, and provide assistance for staff training. The project became effective on January 7, 1981. ONATEL started functioning in January 1980 and is developing satisfactorily. A delay of three tc four months in the recruitment of consultants has delayed project inD lementation correspondingly.  - 34 - ANNEX III Page 1 of 2 BURUNDI INTEGRATED RURAL DEVELOPMENT PROJECT/NGOZI III Supplementary Project Data Sheet Section I: Timetable of Key Events Identification: March 1978 Preparation: Government, with IDA's assistance Appraisal Mission: July-August 1980 Negotiations: April/October 1981 Planned Date of Effectiveness: February 1982 Section II: Special Bank Implementation Action None Section III: Special Conditions of the Project: The Government and the Association would exchange views at least once a year on Government policies relating to coffee production (para. 31). The terms of reference, qualifications, experience and terms and conditions of employment of the specialists and consultants recruited under the Technical Assistance Program would be satisfact- ory to the Association and the proposed contracts, including terms of reference would be submitted to the Association for its review and concurrence (para. 54 and 55). The Association would be consulted on (a) the appointment of key national staff of the RDC and (b) any changes to be made in these appointments (para. 58). A national technical committee would be set up by December 31, 1981 to define the technical operating norms of the washing stations and handpulping centers and monitor the RDC's compliance with them (para. 49). The Government would ensure that the recurrent annual needs of the RDC for fertilizers and pesticides are met, including subsidies and provision of foreign exchange, as necessary (para 50). Government contribution would be made available to the RDC on a quarterly basis (para. 60). The RDC would establish a compensation plan which would offer adequate incentives to its staff (para. 58).  ANNEX III - 35 - Page 2 of 2 Project accounts would be audited by independent auditors acceptable to IDA (para. 63). Project expenditures would be made in accordance with Annual Work Program and budgets which would be submitted to IDA for approval (para. 56). The Government would inform IDA sufficiently in advance of any envisaged modifications in the composition of the Board of Directors of the RDC (para. 57). Construction works would be carried out by force account (para. 61). Additional Conditions of Effectiveness Recruitment of key technical assistants and Burundian staff (paras. 55 and 58). Establishment of the RDC with statutes satisfactory to IDA (para. 56). Signature of a prefinancing agreement between the RDC and CAMOFI guaranteed by the Government (para. 60). Submission of an annual Work Program for the period of September 1981 to December 1982 (para. 56). Deposit by the Government of the first quarterly installment in the RDC's bank account (para. 60). Audit of the Ngozi II Project Accounts (para. 63). Conditions precedent to effectiveness of the IFAD loan and to the initial disbursement under the Kuwait Fund loan have been fulfilled. Conditions of disbursement Approval of the Work Program and Budget of any given year would be a condition of disbursement against activities for that year (para. 56).   P,0JECT AREA -- NOOZI PROVINCE I NATIONAL HOADS!t30 B URU NDI ZONE Du PRojPT WOO?!I PRO0VINEW ROUTES NATI5ONALE$ A COMMUJNAL OFFICE! I MAIN ROADS! I INTEGRATED RURAL DEVELOPMENT PROJECT-NGOZI III BUREAU DR COMMUNE ROUTES PRtNC,PALES * EXISTING COFFEE WASHING STATIONS!I---- SECONDARY RtOADS / PROJUT DE DEVELOPPE/WENT RURAL INTEGRE-NGOZI Iff USIPPES OE CAFE EXISTANTES ROUTES SeCONDAINES .....PROJECT AREA OF lIf ST COFFEE PROJECT