The World Bank Burundi Resilient & Sustainable Growth DPO (P180744) Program Information Document (PID) Concept Stage | Date Prepared/Updated: 05-Oct-2023| Report No: PIDC36854 Page 1 of 6 The World Bank Burundi Resilient & Sustainable Growth DPO (P180744) BASIC INFORMATION A. Basic Project Data OPS TABLE Country Project ID Project Name Parent Project ID (if any) Burundi P180744 Burundi Resilient & Sustainable Growth DPO (P180744) Region Estimated Board Date Practice Area (Lead) Financing Instrument EASTERN AND SOUTHERN Jan 15, 2024 Macroeconomics, Trade Development Policy AFRICA and Investment Financing Borrower(s) Implementing Agency Ministry of Finance, Budget Ministry of Finance, Budget and Economic Planification and Economic Planification Proposed Development Objective(s) The Development Objective of the Program is to support resilient and sustainable growth in Burundi through (i) improving fiscal management and transparency, (ii) improving the business environment for private sector-led growth, and (iii) strengthening the foundations of the enabling energy and digital economy sectors. Financing (in US$, Millions) FIN_SUMM_PUB_TBL SUMMARY Total Financing 80.00 DETAILS -NewFin3 Total World Bank Group Financing 80.00 World Bank Lending 80.00 Decision The review did authorize the preparation to continue B. Introduction and Context Country Context 1. Economic growth and development in Burundi, a small landlocked country of 13 million people in the heart of Africa, has been held back by repeated cycles of political unrest and civil conflict . Persistent fragility has taken a heavy toll on the country’s economic performance and social development, with GDP per capita contracting by a cumulative 41 percent between the early 1990s and 2020. While Burundi has shown capacity for economic growth during periods of stability (for instance, the economy grew at 4.5 percent per year during the largely peaceful period between 2006 and Page 2 of 6 The World Bank Burundi Resilient & Sustainable Growth DPO (P180744) 2014 and social indicators improved rapidly), these periods have tended to be too short to result in meaningful improvements in living standards of Burundi’s population. According to the 2020 Household Budget Survey (HBS), 51 percent of the population lived below the national poverty line, a stagnation compared to the previous HBS of 2013/14. The government recognizes the challenges, set ambitious targets for growth and development, and shows willingness to engage in substantive reforms to break out of the low growth equilibrium. A sustained period of robust economic growth, along with governance reforms, are required to achieve substantial improvements in living standards of the Burundian population. 2. The Burundi government is implementing a reform program to establish the foundations for robust and sustained economic growth, which is supported by this proposed operation. As part of its National Development Plan (2018-2017), the government aims to revitalize sectors with strong growth potential. The proposed operations supports this aim through reforms in sectors that can be direct engines of growth (mining and micro, small and medium-sized enterprises), reforms in key enabling sectors (energy and digital economy), and reforms to strengthen fiscal management and transparency. The government is undertaken reforms to create a conducive macro-economic environment, which includes FOREX reforms to gradually align the exchange rate with its intrinsic value. While risks exist, the macroeconomic policy framework is adequate for the proposed operation and is anchored in the recently approved IMF Extended Credit Facility (ECF) program. Relationship to CPF 3. The proposed operation supports the objectives of the World Bank Group’s Country Partnership Framework (FY19-24) and complements World Bank-financed IPF operations. The operation supports CPF Focus Area 2 (“Strengthening Foundations for Economic and Social Resilience�) and the Foundational Area of “Macroeconomic Stability, Structural Reforms, and Governance�. The prior actions under this proposed operation directly contribute to the CPF objectives as follows: Pillar 1 on improving fiscal management and transparency directly contributes to CPF Objective 3.1 (“Strengthening public sector accountability, efficiency in service delivery, women empowerment and macroeconomic stability�) through the prior actions on fiscal management (PA1-2) and transparency of and access to official statistics (PA3). Pillar 2 on improving the business environment for private sector-led growth contributes macro- economic stability and to CPF sub-objective 2.1.4 on expanding employment opportunities. Pillar 3 on strengthening the foundations of the enabling energy and digital economy sectors contribute to CPF objective 2.2 (“Increasing access to energy for poor families�). The proposed operation builds on and complements other operations in the portfolio, notably the operations providing targeted relief to poor families (cash-for-work project and the Turikumwe community-driven development project), the digital development project (P176396) and the energy investment operations (P133610, P164435). C. Proposed Development Objective(s) The Development Objective of the Program is to support resilient and sustainable growth in Burundi through (i) improving fiscal management and transparency, (ii) improving the business environment for private sector-led growth, and (iii) strengthening the foundations of the enabling energy and digital economy sectors. Key Results 4. The operation aims to reignite economic growth in Burundi through reforms in growth engine sectors and enabling sectors, while improving fiscal management and transparency . High levels of poverty and vulnerability in Burundi are tightly linked to the absence of economic growth, and rekindling and sustaining growth is crucial to improve living standards of the population. Mining sector reforms aim to leverage Burundi’s mineral wealth (mainly nickel) to generate both government revenues and local development benefits in terms of direct and indirect jobs and skills Page 3 of 6 The World Bank Burundi Resilient & Sustainable Growth DPO (P180744) development. To maximize the spillovers from mining sector development, the operation aims to improve access to finance for MSMEs by expanding the partial credit guarantee scheme (“FIGA�) and operationalizing the personal property securities register, so that movable assets can be used as collateral for loans. Reforms in growth engine sectors can however only be successful if accompanied by reforms in key enabling sectors, notably energy (lack of access to reliable electricity is a key constraint to economic activity in Burundi) and digital. To reduce fiscal risks and contribute to macroeconomic stability, the operation supports actions to increase tax compliance and improve the management of contingent liabilities. D. Concept Description 5. This proposed Development Policy Operation (DPO) is the first in a programmatic series of two to reignite sustainable economic growth in Burundi. The objective of the proposed operation is to support resilient and sustainable growth through (i) improving fiscal management and transparency, (ii) improving the business environment for private sector-led growth, and (iii) strengthening the foundations of the enabling energy and digital economy sectors. The operation responds to the urgency of strengthening the foundations for robust and sustainable economic growth in Burundi, a country that has not seen any sustained economic growth in the last thirty years, with exception of the 2006- 2014 period. The proposed reforms are aligned with Burundi’s National Development Plan (NDP 2018-2027), in particular the first strategic objective of “Revitalizing sectors with strong growth potential�. 6. Actions in the first pillar aim to improve fiscal management and transparency. These include legal and regulatory reforms to regulate SOE’s and local communities’ ability to contract debt, hereby reducing fiscal risk, and to digitize tax declarations and tax payments for large and medium taxpayers, hereby improving tax compliance. Reforms under this pillar also consist of a new statistics law to increase transparency of and access to official statistics and microdata. 7. Actions in the second and third pillar aim to strengthen foundations for stronger economic growth. These include the adoption of mining sector regulations that create an enabling environment for mining sector investments and local development benefits, the adoption of regulations to expand the partial credit guarantee fund for MSMEs and to operationalize the use of movable collateral to access bank loans, and the creation of an enabling legal framework for growth of the digital economy. Reforms to increase access to energy by facilitating private sector investments in power generation from renewable sources and power distribution are also part of this operation. E. Poverty and Social Impacts, and Environmental, Forests, and Other Natural Resource Aspects Poverty and Social Impacts 8. None of the proposed reforms is expected to have significant adverse poverty or social impacts, while several prior actions are likely to have positive effects. The reform of the partial credit guarantee fund is expected to increase access to finance for MSMEs which, according to the latest Enterprise Survey, ranks as a major constraint to their operations. This reform, together with the operationalization of the movable collateral registry, is expected to especially benefit women entrepreneurs whose access to finance is constrained by their low rates of ownership of immovable assets. The energy sector reforms will facilitate private investments in power generation, exploiting Burundi’s significant hydro potential, and power distribution, which is expected to lead to a significant increase in the number of households connected to the grid from a low base. The legal and regulatory reforms in the digital sector are expected to expand internet connectivity and bring down costs. Finally, the regulatory mining sector reforms have the potential to increase the local benefits Burundi gets from its mineral riches, leading to higher local content and job creation in the longer term. Appropriate and binding benefit-sharing and dispute resolution mechanisms will need to be developed to ensure that local communities benefit from mining activities and have a way of airing potential grievances related to mining operations. Page 4 of 6 The World Bank Burundi Resilient & Sustainable Growth DPO (P180744) Environmental, Forests, and Other Natural Resource Aspects 9. Several Prior Action could potentially have negative environmental impacts in the medium to long run, as they will likely lead to additional investments with potential downstream environmental risks and impacts. Per Decree no 100/22, an environmental impact assessment is mandatory for renewable, mining and MSMES investments, and must be done before any project or policy is adopted and implemented. Decree no 100/22, however, does not explicitly refer to ICT investments, and a revised version of the decree should cover medium and large-scale ICT investments as well. Access to financing for MSMEs under Pillar II could contribute to negative impacts on Burundi’s environmental and natural resources due to low awareness among MSMEs of the environmental impacts of their activities and challenges faced in pursuing green growth opportunities. Given their wide spatial and sectoral range, MSMEs may produce more pollution than big businesses due to their informal nature and the resulting lack of regulations. To mitigate potential negative environmental impacts, MSMEs business plans will incorporate environmental and social considerations. In addition to E&S capacity-building activities, Standard ESMP(s) and Environmental Codes of Best Practices (COPs) for the management of E&S risks in MSMEs will be developed for activities that do not fall under Environmental Assessment Regulations (Decree no 100/22), which set the list of activities for which an environmental assessment is required. . CONTACT POINT World Bank Tom Bundervoet Lead Economist Borrower/Client/Recipient Ministry of Finance, Budget and Economic Planification Audace NIYONZIMA Minister of Finance aniyonzima@finances.gov.bi Implementing Agencies Ministry of Finance, Budget and Economic Planification Audace Niyonzima Minister of Finance aniyonzima@finances.gov.bi Page 5 of 6 The World Bank Burundi Resilient & Sustainable Growth DPO (P180744) FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects APPROVAL Task Team Leader(s): Tom Bundervoet Approved By APPROVALTBL Country Director: Hawa Cisse Wague 21-Oct-2023 Page 6 of 6