Burundi gets $75.6m IMF loan to alleviate poverty

By BENON HERBERT OLUKA
Special Correspondent

Burundi is to receive a $75.6 million loan over the next three years from the International Monetary Fund to support the implementation of the country’s poverty reduction programme and its efforts to consolidate macroeconomic stability.

IMF officials said in a July 7 statement announcing the approval of the new loan by the Fund’s executive board that it has been offered under the Poverty Reduction and Growth Facility — a concessional facility for low income countries that has succeeded an earlier arrangement which expired earlier this year.

Loans offered under the PRGF arrangement carry an annual interest rate of 0.5 per cent and are repayable over 10 years with a five-and-a-half-year grace period on principal payments.

The IMF statement said the terms of the loan take into account the financial impact of rising world food and oil prices in 2008.

According to the statement, following the executive board discussion that led to the approval of the loan, managing director and acting chair Murilo Portugal commended the Burundi government for the progress it had made in implementing the country’s first PRGF-supported programme in a difficult post-conflict environment.

“Though structural reforms have been slow, most monetary and fiscal reforms have progressed well. However, despite the progress made, poverty remains widespread, and the challenges for Burundi in meeting the Millennium Development Goals continue to be significant,” said Mr Portugal.

Burundian authorities reported to the IMF that after an upturn in 2006, real gross domestic product growth decelerated from 5 per cent to 3.6 per cent in 2007, mainly because of a poor coffee harvest.

In addition, the end-period inflation had increased to 14.7 per cent from 9.3 per cent in 2006 due to higher international commodity prices and exchange rate depreciation.

Consequently, the new PRGF-supported programme, which is anchored in Burundi’s Poverty Reduction Strategy Paper, was designed to reduce inflation to single digits, ensure fiscal sustainability in the face of heavy debt, improve the composition of spending, strengthen public financial management, enhance governance and accelerate structural reforms to stimulate growth and reduce poverty.

Burundi has now promised to ensure better budget and monetary policy co-ordination, better control of the wage bill, the passing of the draft central bank law by parliament and the implementation of a number of financial safeguard measures to strengthen internal controls and risk management systems.

In his assessment of Burundi’s plans for the loan, Mr Portugal said, “The authorities’ fiscal programme for 2008 targets a substantial increase in capital spending, while accommodating additional spending to boost agricultural output and help alleviate the impact of increasing food and fuel prices on the poor.”

“The success of the programme will depend, in part, on strong and co-ordinated assistance from the international community. Accelerating structural reforms, most notably on governance issues, will also be critical,” Mr Portugal added.