Document of

The World Bank

FOR OFMFCIAL USE ONLY

CF. /6-93 3- Od6

Report No. P-4035-BU

'S

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE D-RECTORS

ON A

PROPOSED CREDIT OF SDR 12.9 MILLION

TO THE

REPUBLIC OF BURUNDI

FOR A

POWER TRANSMISSION AND DISTRIBUTION PROJECT

S

April 18, 1985

Thdisdocument s a restricted distribution ad may be used by recipients ony In the performance oftheir offidal dudes. Its contents may no othrwise be disclosed without Wodd Bak autbhorizaion.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Currency Equivalents

Burundi Franc (BuF)BuF I - US$0.01US$1 - BuF 117.US$1 - 1.04 SDR

I.*

Measurements

GWh gigawatt hour - 1,000,000 kilowatt hourskcal kilocalorie - 3.97 British thermal unitskV Kilovolt ' 1,000 voltskVA kilovolt ar!ipere - 1,000 volt ampereskW kilowatt - 1000 wattskWh kilowatt hour " 1,000 watt hoursMVA megavolt ampere 1,000,000 volt amperesMW megawatt - 1,000 kilowattsmWh megawatt hour 1,000 kilowatt hourstoe ton of oil equivalent - 10,500,000 kilocalorieston metric ton 1.1 US tons

Abbreviations and Acronyms

AfDB African Development BankAfDF African Development FundC.CCE French Central Agency of Economic CooperationCEPGL . Economic Community of the Great LakesEdF Power Company of FranceESMAP Energy Sector Management Assistance ProgramFAC French Aid and Cooperation FundFED European Development FundGOB Government of BurundiGTZ Bilateral Aid of the Federal Republic of GermanyIDC Interests during ConstructionMPWEM Ministry of Public Works, Energy and MinesREGIDESO Electricity and Power Company of BurundiSNEL Zaire Power Company

FOR OFFICIAL USE ONLY

BURUNDI

POWER TRANSMISSION AND DISTRIBUTION PROJECT

Credit and ProJect Summary

'Borrower: The Republic of Burundi

Amount: IDA Credit SDR 12.9 million (US$12.3 millionequivalent)-

Beneficiary: REgie de distribution d'eau et d'electricite(Regideso)

Terms; Standard

Relending Terms: The Government will relend US$12.0 millionequivalent to Regideso at an interest rate of 9.29percent, with a 20 years repayment period,including five years' grace. Regideso will bearthe foreign exchange risk.

Project Description: The main objectives of the project would be toassist the Government in (a) extending Burundi'stransmission and distribution network (i) toimprove the reliability and supply of electricityto Bujumbura and its environs, and Cii) to extendthe availability of electricity to yet unservedmarkets; and (b) strengthening the financialperformance, management and power planningfunctions in Regideso. The project would allowBurundi to make optimal use of the power from theRuzizi II regional plant.

Components: The project would include: (a) a 110 kV transmis-sion line (83 km) from Ruzizi II to Bubanza; (b)construction of 110/30 kV substations in Bubanzaand Cibitoke, two 30 kV subtransmission lines (42km) to supply four regional towns, a 15 or 30 kVfeeder to Katumba and distribution networks inthese towns; (c) construction of distributionnetworks to consumers in six low-income districtsof Bujumbura; (d) rehabilitation of the Bujumburasubstation and Bujumbura - Ruzizi I transmissionline; (e) consulting engineering services,management assistance to Regideso, establishmentof a training center and technical assistance forthe training of Regideso staff; and (f)continuation of the dissemination program ofimproved charcoal stoves in Bujumbuza, and theservices of an advisor to assist the Government indevising strategies to 'mport petroleum products atleast cost.

This document has a restricted distribution and may be used by recipients only in the performance oftheir ofricial duties. Its contents may not otherwise be disclosed without World Bank authorization-

- ii -

Estimated Cost: 1/

Local Foreign TotalProject Components US$ million equivalent

Transmission an Distribution

110 kV Transmission Line 0.90 3.70 4.60Bubanza Substation 0.65 1.10 1.75Cibitoke Substation 0.35 0.60 0.95

30 kV subtransmission Lines 0.31 1.00. 1.30Distribution Networks for7 Regional Towns 0.15 0.55 0.70

Distribution Networks for 6Bujumbura Districts 0.78 3.10 3.88

Training 0.23 1.40 1.63

Engineering, Technical Assistance

Engineering Services 0.16 0.90 1.06Management Assistance 0.18 1.00 1.18Studies 0.02 0.20 0.22Petroleum Adviser 0.01 0.10 0.11Cooking Stoves Program 0.07 0.10 0.28

Base Costs 3.80 13.75 17.55

Contingencies: Physical 0.38 1.33 1.71Price 0.57 1.97 2.54

Total Project Cost 4.75 17.05 21.80

Interest During Construction 2.70 - 2.70Total Financing Required 7.45 17.05 24.50

Financing Plan:

Local Foreign Total-- USA million equivalent--

IDA 1.85 10.45 12.30Other donors 2/ 0.70 6.60 7.30Regideso 2.10 - 2.10Government 0.10 - 0.10Government (IDC) 2.70 - 2.70

Total 7.45 17.05 24.50

1/ Duties and taxes would not be levied on the project.2/ CCCE, the Federal Republic of Germany (GTZ), and Belgium.

- $ii -

Estimated Disbursements: IDA FY FY8b FY87 FY88 FY89 FY90

Annual 2.0 6.0 2.3 1.6 0.4Cumulative 2.0 8.0 10.3 11.9 12.3

Staff Appraisal Report: Burundi Power Transmission and DistributionProject, April 18, 1985 (Report No. 5312-BU).

Economic Rate of Return: Regional investment program: 8%.

Benefits and Risks: The principal benefits of the proposed projectwould be Burundi's access to the least-costsource of electricity and extension of theelectricity supply to hitherto unservedpopulation groups. The project faces no specialrisk.

Maps: IBRD 18516 Bujumbura Areas to be ElectrifiedIBRD 18517 Burundi Power Transmission andDistribution Project.

INTERNATIONAL DEVELOPMENT ASSOCIATION

REPORT AND RECOMMENDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS ON A PROPOSED

CREDIT TO THE REPUBLIC OF BURUNDIFOR A POWER TRANSMISSION AND DISTRIBUTION PROJECT

1. I submit the following report and recommendation on a proposeddevelopment credit to the Republic of Burundi for the equivalent of SDR12.9 million (US$12.3 million) on standard IDA terms to help finance aPower Transmission and Distribution Project.

PART I - THE ECONOMY 1/

2. The Last Country Economic Memorandum on Burundi (Report 4784BU)is dated December 26, 1984. The following section incorporates itsfindings and conclusions. Country data are provided in Annex I.

Background

3. Burundi is a small, land-locked country in East-Central Africa.It covers a territory of 27,865 square kilometers (including its share inLake Tanganyika), and has a population of 4.4 million inhabitants. With anestimated Gross National Product of US$240 per capita it is one of theworld's least developed countries. The overall literacy rate was about 25%in 1982, morbidity is high, and basic social infrastructures are stilllacking. Limited natural resources, population pressure, scarcity ofqualified and experienced manpower, and isolation from main trade routes,characterize this extremely poor country.

4. Nearly 95% qf Burundi's population is rural, living on scatteredhomesteads. Bujumbura, the capital city, had about 165,000 inhabitants in1982. Agriculture, mostly smallholders who grow subsistence crops andcoffee, contributes 60% of GDP at factor cost and 90Z of merchandiseexports. A few large farms grow sugarcane, tea and quinine. Othernatural resources are scarce. Identified minerals include nickel,phosphate, petroleum, vanadium, some fluvial gold and calcium, but theeconomic justificatioa for their exploitation is still uncertain.Burundi's manufacturing sector is small, its growth being limited by thesmall size of the domestic market, the country's isolation from traderoutes, vulnerability to disruptions in the external transport corridors,high transport costs, and the lack of skilled manpower.

1/ This part is substantially the same as that in the President's ReportP-3526 BU on a Third Education Project, considered by the ExecutiveDiretctors on April 23, 1985.

- 2 -

5. The country is the second most densely populated country inAfrica, with a density of 155 per km2. Population pressure has led todeclining soil fertility, soil erosion and deforestation. Althoughagricultural statistics are poor, there are indications that, in recentyears, foodcrop production may have declined in per capita terms. Netpopulation growth is projected at 2.7% p.a. during the current decade. (Inthe absence of migration, however, this growth would be higher; populationcould triple in thirty years). The implications of this rapid growth forhealth facilities, schools, employment and land availability areworrisome. IDA has emphasized the urgent need to initiate family planningprograms. Although progress has been slow, the Government has recentlyacknowledged the problem, and a first family health project is beingconsidered (para. 28).

b. The country has an extensive road network. Main roads arepassable all year. There is an international airport at Bujumbura.Burundi, however, remains dependent for most of its imports and exportsupon two transport routes to the Indian Ocean through neighboringcountries. The Northern Route, by highway from Bujumbura to Mombasa,Kenya, via Rwanda and Uganda is 2,020 km. in length. This route suffersfrom poor road conditions, and cumbersome administrative borderprocedures. The Southern Route, by barge down Lake Tanganyika, then byrailway to Dar-es-Salaam, is 1,425 km. It tends to be inefficient becauseof long delays in clearing Bujumbura port, antiquated barges anddisruptions on the Tanzanian railway.

7. Transport charges on these routes add significantly to the landedcost of imports. The passage of goods through neighboring countries ishindered by factors which are out of Burundi's control. Interruption ofcrucial supplies hinders project implementation and forces firms to holdlarge stocks of inputs and spare parts. In 1980, the Bank prepared a studyof the external transport connections of Burundi and Rwanda. A moreextensive study covering Burundi, Rwanda, Uganda and Eastern Zaire wascarried out by UNCTAD. The findings and recommendations of these studieshave assisted the countries and donor agencies to agree on action andpriority investments. Several bilateral and multilateral meetings led,inter alia, to the Northern Corridor Transit Agreement which was concludedin Kampala in September 1984. The agreement will result in significantsimplification of customs procedures at border crossings. On the SouthernRoute, a number of external donors have been financing improvements inphysical facilities at the ports of Kigoma and Dar-es-Salaam. IDA is nowpreparing a report which will update and review the actions taken so farand will help to define priority policies and investments in regard to theinternational transport.

Economic Developments: Goals and Performance

8. In the mid-1970s, Burundi's economic situation benefitted fromseveral favorable factors: (i) a new Government, headed by PresidentBagaza, took power in 1976, ending a period of political instability; (ii)the prices of coffee in the international market tripled, resulting insubstantial windfall profits and accumulation of public savings; and (iii)the level of foreign aid to Burundi increased considerably, in support ofthe new regime's stated commitment to economic development. These

- 3 -

circumstances appeared to be a good omen for the Third Development Plan(1978-82), and expectations for an improvement in living conditions weretherefore high.

6 9. The Third Development Plan (1978-82) included broad objectivessuch as the transformation of the economic structure; the mobilization ofresources for production; the reduction of poverty, together with improvedincome distribution; and increased access to education and healthservices. Performance during the Plan period was relatively goodespecially in comparison with most of the Sub-Saharan countries. On theaverage, real GDP at market prices rose by 3.1% per year, with grossdomestic investment averaging about 13.5% of GDP, far above the 8.0% shareof the previous five years. The public sector took the lead in theinvestment effort, accounting for 90% of the total. Foreign donors financedabout 60% of the expenditures. The growth in total value added was mainlydue to the growth in the modern sector stimulated by public investmentspending. The output of the subsistence sector which accounts for 85% r,fthe population, grew more slowly than the population, widening the incomegap between rural and urban dwellers. The investment program favoredmostly the modern sector, and the effects of this investment on income andforeign exchange earnings were limited. Most of the projects were capitalintensive and created few jobs; moreover, the protection extended to thenew ventures made them inefficient and heavily dependent on importedmaterials, adding little to the country's foreign exchange earningcapacity.

10. The financial situation, which was kept under control during the1970's, deteriorated rapidly at the turn of the decade. This was due totwo main factors: (i) deterioration in the terms of trade -- by 75% bet-ween 1977 and 1982 -- reflecting a decline in coffee prices and a doublingin import prices, notably of oil products, which pushed the current accountdeficit to about 12% of GDP; and (ii) insufficient and delayed response ofthe Government to the changing economic environment. To support the balanceof payments, the Government relied mostly on a run-down of its reserves; italso increased restrictions on imports and on remittances of foreignexchange abroad. The Burundi Franc appreciated with respect to the curren-cies of the major trade partners, reflecting the appreciation of the USdollar to which it was pegged.

11. These unfavorable developments had serious consequences for thebudget. The terms-of-trade deterioration reduced import capacity and ledto budgetary problems, as the Government's receipts from coffee exportsfell dramatically, necessitating cutbacks in imports and public spending.These factors as well as the poor agricultural conditions of 1982 led to adecline in income, which spread into 1983 and affected economic activity.The overall result was a widening of the resource gap, depletion ofreserves, and an accumulation of payment arrears in the Governmentaccounts.

12. During the 1978-82 period, Burundi was able to receive externalfinancing on very soft terms. Grant assistance was substantial. Inaddition, external public borrowing during the period carried an averageinterest rate of only 2.4% and an average maturity of 31 years including

eight years of grace, implying a grant element of about 60%. Debtservicing remained, therefore, low -- at about 5% of exports of goods andnonfactor services in 1978-82. Bank projections indicate, however, a rapidincrease to about 20-25% in the next few years due to the composition andterms of past borrowing.

13. The lesson of the Third Plan period is that Burundi mustestablish development priorities and select investment projects with greatcare. The linkage between macroeconomic planning and the selection ofprograms and projects needs to be improved. The private sector,nongovernmental organizations, and cooperatives must be enlisted to themaximum extent feasible to participate in the development effort.Sustained technical assistance will be needed for several years in order tostrengthen the country's ability to identify, prepare, and carry outwell-conceived plans and projects.

14. The year 1983 was the first year of the Fourth Development Plan(1983-87), which , as explained further below, incorporates an ambitiousinvestment program of USS230 million per year (US100 million more thanwhat was achieved in the Third Plan Period). The Government tried to raiseits revenues in order to be able to carry out this ambitious program. Newtax measures were introduced, notably increases of 50 to 100% in the ratesof the most important taxes -- transaction tax, income tax and tax on beerconsumption, which in the last years replaced coffee as the single mainsource of government fiscal revenue. By mid-1983, however, there weresigns of increasing financial stress. The Government tried to cope withthe situation by attempting to reduce the investment budget by 45%, butthis proved difficult. While 80% of the investment planned for 1983 wasactually implemented, this was obtained at a great cost: the publicdomestic debt increased substantially; unpaid obligations accumulated,representing (at end-1983) 30X of Government spending; and the overallbudget deficit reached 5% of GDP. Economic growth, which had beennegligible in 1982, remained marginal in 1983, with non-agriculturalsectors registering an absolute decline.

15. In response to this difficult situation, the Government took anumber of important actions. First, in November 1983, the FBu was delinkedfrom the US dollar tto which it had been linked since 1976) and pegged tothe SUR, with an implicit devaluation of about 30%. Second, in early 1984,the producer prices of the main export crops were raised to providestronger incentives to producers. The coffee price was increased by 6%,the tea price by 3b%, and the cotton price by 17%. Third, in an attempt tobalance the current budget, the Government increased the rates of the mostimportant taxes (para. 13), froze public wages and salaries, improved thesystem of tax collection, and cut the recurrent subsidies to theparastatals.

16. According to preliminary and partial information, the year 1984was another difficult year. Agriculture was adversely affected by thedrought and foodcrop production may have fallen by as much as 5-6%. Cashcrop production did not fare better: coffee production fell from a high of

3b,000 tons in 1983 to 27,000 tons, offsetting the increase in the outputof other cash crops, notably tea. The modern sector has registered somereal growth (owing to the partial liquidation of government arrears), butthe poor performance of the primary sector caused total GDP to stagnate.On the financial side, both external and internal imbalances seemed to haveimproved. Partially, as a result of the last year devaluation, Burundi'strade balance improved. However, because of increased factor servicespayments and debt servicing charges, the current account deficit remainedabove 12% of GDP. The public finance situation has also improved.Revenues are estimated to be 20X higher than in 1983, reflecting (a) theimpact of the devaluation on revenues from taxes on international trade;(b) reinforcement of tax collection procedures; and (c) improvement in theeconomic activity of the modern sector. Current expenditures weremaintained at about the same level, in nominal terms, and capital outlayswere reduced to their lowest level since 1979. As a result, the budgetarydeficit was reduced from FBu6.5 billion to FBu3.4 billion (or from 5X ofGDP to 3%).

Sectoral Developments and Issues

17. The very rapid population growth in a country which is alreadyoverpopulated represents the most threatening constraint on economicdevelopment which Burundi has to face (para. 5). The Government of Burundirecently announced its intention to adopt a program to reduce populationgrowth and to establish, as a first step, an Interministerial FamilyPlanning Commission. One of the first tasks of this Commission will be toplan and develop a population program. Fertility reduction will require astrengthening in the management and planning capacity of the Ministry ofHealth, an improvement in the delivery of basic health services, as well asan increase in public spending on health, which declined in real terms inthe last five years.

18. In Agriculture, the most important issues for future developmentrelate to productivity increases, to soil protection, and erosion control.Food crop promotion is essential in order to assure sufficient supplies fora fast growing population. Better utilization of the country's traditionalexport crop potential and diversification into new export crops appearscrucial because of limited possibilities for new export revenue earningactivities. Priority actions to be undertaken in agriculture aretherefore: promotion of applied research, in particular on food crops;strengthening and improvement of extension services; adequate and regularprovision of inputs; initiation of immediate and longer-term measures toprotect the country's agricultural potential; and amelioration oforganization and operations of the three main export crop subsectors(coffee, tea, and cotton), principally through improvement in themanagement of agricultural public enterprises and through adequate pricingand stabilization policies. On the institutional side, furtherstrengthening of agricultural planning, and project preparation andmonitoring capacity appears crucial in order to assure effective design andimplementation of projects. The concept of Regional Development Companies,which the Government established to promote integrated rural development,

needs to be carefully reviewed in order to adapt their design to thecountry's needs and possibilities, in particular in terms of finances andhuman resources.

19. Manufacturing Industry. Industrialization is constrained by thelimited natural resources, low productivity of the industrial labor forceand the acute shortage of managers, as well as by the country's smallmarket, the low purchasing power of its population, the country'sland-locked position, and difficult transport conditions which increasecosts. Burundi does offer, however, certain advantages for industrialdevelopment: basic infrastructure is available in the major urban center atreasonable costs; the country's land-locked situation constitutes a naturalprotection for import substitution projects; and domestic finance isreadily available to manufacturers. During the 1978-82 period,protectionist measures created a favorable climate for manufacturingexpansion. Modern manufacturing value added grew at an average annual rateof nearly 10% in real terms, reaching about 5X of GDP in 1982. Most ofthis expansion has been oriented to the domestic market. Productionremains typical of the first generation of import substitution, based onimported raw materials with exports limited to processed coffee, tea,cotton and a few other items. Capacity utilization is low because of thesmall size of the domestic market, high tariffs in neighboring countries,and high production costs. However, due to the monopolistic situationenjoyed by most firms and the *"cost-plus" system of price control, thesector is profitable. Since the mid-1970s, the Government has participatedin a number of joint ventures with foreign interests and established publicenterprises to manage large industrial operations that the private sectorhad avoided because of their complex management and large financialrequirements. Most of these public enterprises have been created withoutan adequate financial structure and/or sufficient qualified personnel andare now a drain on the budget. The Government has recognized theseproblems and has taken some measures to deal with them. It created aPublic Enterprises Commission (CGEP) to improve the efficiency of publicenterprises, sell off enterprises to private investors when possible, andphase out those unlikely to become viable. Burundi faces a range ofproblems in the energy sector, which are reviewed in para. 30.

20. The Government has made a considerable effort to develop basiceducatic and increase primary enrollments. Average percentages of capitaland recurrent budgetary expenditures allocated to education are comparableto those of other African countries. However, they are high consideringthat the primary enrollment rate in public schools is only about 30% andcannot be increased given present budgetary constraints. Measures aretherefore being taken to increase the share of resources which are devotedto basic education, through the adoption of cost saving measures at thesecondary and university level, and to use these resources moreeffectively, in particular through the introduction of double shifting, andupgrading of teacher training. The Ministry of Education is also providingassistance to improve the quality and scope of education given in privateschools and adult social centers.

-7-

The 1983-87 Fourth Plan

21. The ?ourth Plan was presented at a Round Table meeting organizedby the UNDP in February 1984. The Plan envisages real GDP (factor cost)growth of 3.7% per year between 1982 and 1987 and total investment ofFBu1O7.2 billion (in constant 1981 prices), equivalent to about US$1,200million. Barring an unforeseen and substantial improvement in coffeeprices and a major inflow of fresh 'inancial aid, achievement of the FourthPlan objectives does not seem likely. Given the prospective resourceavailabilities, perhaps not more than 60% of the intended investment wouldbe feasible. Even with such a shortfall, external donors would have toprovide 80 of total financing.

22. The Fourth Plan anticipates that 30% of the investment financingwill come from domestic sources (20Z from the budget, 1OZ from bank creditand the private sector) and 70% from foreign aid. In fact, the Fourth Plananticipates an annual average of US$160 million in foreign aid for projectfinancing, which is almost twice what was received during the Third Planperiod. A doubling of net external assistance, while not impossible, doesnot appear very probable; a more conservative figure would be betweenUS$100-130 million per year. The Government may therefore have to cut theinvestment program.

23. Regional development in Central Africa will also be important toBurundi's economy. In September 1976, Burundi, Rwanda and Zaire signed aconvention establishing the Economic Community of the Countries of theGreat Lakes (CEPGL). The Community, which has its seat in Gisenyi,Rwanda, aims inter alia at stimulating and intensifying intra-regionaltrade and cooperation in a wide range of activities. A major objective ofthe Community is the electrification of the Great Lakes region. A firststep is the Ruzizi Project, cofinanced by t'.-e European Development Fund,the regional Development Bank (BDEGL - see below), Italy, and IDA, which isabout to start. A glass container project, which is the first majorregional industry to be implemented under the aegis of the CEPGL, isunderway. The three countries have set up a joint development bank (BDEGL)to finance regional development projects, in particular exploitation ofmethane deposits in Lake Kivu and development of a fishing industry aroundLake Tanganyika.

PART II - BANK GROUP OPERATIONS AND STRATEGY

24. The history of Bank Group operations in Burundi closely followsthe three phases of the country's political and economic development sinceIndependence in 1962. To the political turmoil of the 1962-1976 periodcorresponds a phase of limited operations (coffee production, highwayengineering and maintenance and water supply). With the period ofincreased political stability came a rapid acceleration of IDA lending for

-8-

agriculture and highways as well as an extension of assistance to newsectors: fisheries, education, industry and rural development. Financingwas also provided to improve the telecommunications network, explore thefeasibility of exploiting nickel deposits, and strengthen the capacity ofthe Ministry of Planning, and the management of urban services inBujumbura. As of September 30, 1984, Burundi has received 23 creditstotalling US$196 million; 10 credits, totalling about US$46 million hadbeen totally disbursed. IDA is now one of the main sources of financialassistance to Burundi.

25. Project Implementation. Projtct performance has, on the whole,been satisfactory. The disbursement rate of 27X in FY82-84 is above theaverage for countries of the Eastern and Southern Africa Region. Physicalimplementation ef infrastructure projects or components (roads, schools,coffee stations, telecommunications) has been satisfactory. The nickelexploration project showed that the ore content of the mineral was lowerthan expected, and that exploitation of the deposit would not be economicin the near future. Implementation of the pilot local constructionindustry project has been hampered by the economic recession. In theproductive sectors the record is mixed. While agricultural projects hadsome success in increasing the production and quality of coffee, and inincreasing forest areas, they have had no apparent impact on developingfood crop production because of the absence of technical packages whichcould be readily adopted by farmers and the lack of a coherent policy onagricultural inputs and services. The DFC Project failed to develop apipeline of small enterprise projects in the industrial sector: the weakmanagement of the Development Bank compounded the structural constraints ofthe country which cannot be overcome in the framework and time span of oneproject alone. Operations of the glass container company financed by IFCare affected by poor market conditions due to lagging beverage consumption,competition from cheaper imports in neighboring export markets and the lackof progress in the negotiations of preferential tariffs with Rwanda andZaire. The fisheries project failed largely because it was too complex inrelatioa to the institutional and management capacity of the implementingagency. The impact of the projects on Institutional Development has beenmixed. In some projects (Highway, Coffee), the presence of an effectivetechnical assistance team led to a successful project implementation butdid not result in the strengthening of the capacity of local institutions.In the education and telecommunications projects, on the other hand,efforts in institution building and training have had good results, and theassistance provided under the Second and Third Technical AssistanceProjects has strenghtened the capacity of the Ministries of Planning andAgriculture to identify and address key policy issues; select, prepare andmouitor projects; and improve coordination between them. Similarly, theurban project was successful in strengthening the Bujumbura municipality.IDA-financed projects have also provided a framework for policydiscussions and decisions. Discussions under the Education projects led,inter alia, to the adoption of cost savings and cost-recovery schemes, amore equitable distribution of school facilities, reorganization ofsecondary education, and development of non-formal education for adults.The urban project has accomplished major changes in urban programs over thepast several years including rhe lifting of rent ceilings and the adoptionof cost-recovery schemes.

-9-

26. Economic and Sector Work and Evolution of Dialogue. In order toassist the Burundian authorities in defining the necessary adjustmentpolicies, economic and sector work was intensified in the past two years.In the agricultural sector, the dialogue is focusing on the need todeemphasize rellance on complex, rural development projects and to improveresearch and extension services, diversify foodcrop production and exportcrops, design input policies, and promote the private sector. In theenergy sector, our dialogue has contributed to focus Government attentionand actions on key issues. The recent discussion of the manufacturingsector report has established the basis of a dialogue on industrialpolicy. In the transport sector our dialogue with Burundi and neighboringcountries has contributed to the removal of some of the administrativebottlenecks on the northern route. The population issue has been theobject of repeated discussions with the Government and is one of the mainthemes of our policy dialogue with Burundi.

27. Strategy. IDA's strategy places short-term stabilization effortsin the context of medium-term adjustment policies and long-term developmentprograms designed to address the country's structural constraints. We planto focus our assistance to the Government on the design and implementationof medium-term economic policies and actions so as to improve theefficiency of resource allocation through the strengthening of publicsector management (investment selection, monitoring and aid coordination,parastatal management, reorientation in the management of the agriculturalsector). While some recent adjustment measures show that Burundianauthorities appreciate the need for demand management, there is onlylimited awareness of the options available and possible impact of measuresaimed at increasing output and productive capacity. Our assistance in thisarea could have a critical impact. At the same time, IDA will continue tosupport long-term efforts to develop humar. resources, strengthenInstitutions, and develop and maintain infrastructure which will have anindirect and long-term impact on production, as well as policies andspecific project choices which would improve the equity of incomedistribution. Priority will be given to the design of an action program tocontrol population growth. We believe that given the broad developmentneeds of Burundi, and the need to strengthen the management capacity of theBurundian administration, it is important that the Bank remain active inthe main sectors of the economy; only then will we be able to provideprudent and coherent advise to the Government on the overall management ofthe economy as well as sectoral issues and policies. No other donor orinstitution (with the partial exception of the IMF) is in a position toplay this vital role.

28. In order to implement this strategy, our Economic work willinclude the review and monitoring of the investment program, studies toidentify ways of increasing the efficiency of the public sector and a CEM(FY86-87). We shall work closely with the IMF to prevent duplication ofefforts. As to Sector work, the emphasis will be on (i) increasingagricultural production including studies on land use issues, erosioncontrol and agroforestry, export crops promotion and financial aspects ofagricultural projects; (ii) raising industrial output, including a tariffstudy and a study on long term potential for industrial diversification and

- 10 -

regional cooperation. In other sectors, such as transport, humanresources, energy and mining, our sector work will be limited to updatingand consolidating the results of previous studies. The lending programincludes proposed projects in agriculture (agricultural services;foodcrops; forestry; export crops), human resources (education; health/population); transport and communications; and energy.

PART III: THE ENERGY SECTOR

Background

29. Burundi's principal energy resource is its forest, half of whichis natural, which covers about 6Z of the country. Peat is available inrelative abundance but is not traditionally used. The potential fordevelopment of hydroelectric power exists but development is costly becausesites are widely scattered and have low capacity. Recent reconnaissancework suggests the presence of oil under Lake Tanganyika and the Ruziziplain. In the renewable energy subsector, the potential is limited.Biomass fuels (fuelwood, charcoal and animal residues) account for about95Z of the total energy consumption, petroleum products about 4%, andelectricity 1%. The possible substitutes for charcoal and firewood areelectricity, kerosene and peat. Electricity for cooking at present tarifflevels costs roughly the same as charcoal at present market prices, but thehigh cost of electric stoves and the connections are beyond the reach ofmost of the urban population. The cost Or imported petroleum productsprohibits using kerosene for cooking except for the few affluent. Effortshave been made to supply peat as a cooking fuel, but to date it has noadvantages over charcoal in cost or acceptability.

Sector Issues

30. A UNDP/World Bank Energy Assessment mission 2/ identifiedBurundi's most pressing energy issues to be: (i) the rapid depletion offorestry resources and the fact that reforestation efforts compete for landwith food and export crop production; (ii) the high cost of oil imports;and (iii) institutional weakness in the electricity subsector. TheGovernment, with assistance from the UNDP/Bank energy management programand other donors has started to implement a program (i) to improve forestrysector management and policy; (ii) to reduce fuelwood demand by introducingmore efficient firewood and charcoal cookstoves and kilns; (iii) to developthe use of peat as a substitute for wood, charcoal and petroleum products;(iv) to investigate alternative and contingency supply arrangements foroil imports; (v) to improve the transmission network and establish astrong unit for power planning; and (vi) to contract with an internationalcompany for petroleum exploration.

2/ Burundi: Issues and Options in the Energy Sector", June, 1982.

- 11 -

Traditional Energy

31. Woodfuel and Charcoal. The Forestry Department of the Ministryof Agriculture and Livestock has launched a long te=m program aimed at: (a)developing plantations and rural nurseries to provide plants to farmers;(b) reinforcing forestry services; and (c) setting-up long-term pricing andmarketing policies. This program is assisted under the IDA ForestryProject and by other donors, including Belgium, the Federal Republic ofGermany, France, the African Development Bank, the European DevelopmentFund and UNDP. More efficient charcoal production methods have been testedand promoted under the IDA First Forestry Project (CR-918-BU). Under theIDA Urban Development Project (CR-1049-BU) an improved charcoal stove wasdesigned which provides fuel savings of 30Z compared to the traditionalstove. A promotion program is to be launched to encourage the use of thisstove. Efforts under the Forestry Project to design an improved woodstovehave, however, been unsuccessful because the rural population is notaccustomed to using stoves and has no monetary incentive to save fuelwoodwhich it gathers at no monetary cost. Studies on present cooking practicesand incentives to use improved cookstoves, as well as to design aneconomically acceptable cookstove and test its acceptance, would be neededbefore a promotion program could be launched. There are no immediate plansto proceed with such studies, however, pending discussions with Governmentof experience to uate, and the potential for achieving further progress inthese efforts at reasonable cost. In the meantime, as noted above, effortsare being concentrated on improved efficiency in charcoal production andutilization, especially in urban areas. When a program has been agreedwith Government for woodfuel stoves, the Association would be prepared tosupport its promotion.

32. Peat. Production problems keep the greater part of Burundi'sabundant peat resources unavailable or prohibitively expensive. Questionsremain about the technical feasibility of extracting peat in largequantities, the market and the environmental effects of large-scaleexploitation of these peat resources. Production of peat is assumed tohave reached 15,000 tons in 19F4. Consumption is very limited. TheBurundi army purchases about 80% of all peat sold, and the remainder issold to brickmaking operations, tea plantations, bakeries, hospitals, andto missions located near the bog sites. Peat is not used as a householdfuel (pare 29). A report on peat utilization prospects completed in early1985 under the ESMAP concluded that peat could substitute for oil for someindustrial uses and recommended a demonstration project to test thisapproach.

Commercial Energy

33. Petroleum. Petroleum exploration is underway (para. 29), butfor the present, Burundi is entirely dependent on foreign sources for itssupply of petroleum products. The major issues are related to the veryhigh cost of imported oil and the vulnerability of the supply routes tointerruption. In 1982 and 1983, the costs of petroleum imports accountedfor about 16% of total merchandise imports and 37% of merchandise exports.

- 12 -

The price established by the Ministry of Commerce and Industry in May 1983of about US$85 per barrel is based on the price of products from theMombasa refinery (i.e. including freight but exclusive of taxes). Pricelevels were last adjusted in December 1983. A consultant funded by ESMAPhas established that the least-cost alternative would be to purchasefinished products on the Middle East open market and transport them thcoughthe Dar es Salaam/Kigoma route provided that the reliability of this routewas improved. This could yield savings of about 12 percent of the importbill. The Government has built additional storage tanks at Gitega.However, these tanks are empty as problems remain regarding the financingand the management of the stocks. The MPWEM is preparing contingencysupply arrangements.

34. The Power Sector. Electricity currently provides about 23%percent of the commercial energy in Burundi. Only about two percent ofBurundi's population has access to electricity. At present, Burundi'stotal installed capacity is 19.8 MW, of which 60% is hydro, ana theremainder is diesel. Electricity is supplied mainly from the Mugere hydroplant (8 Mw), from Zaire's Ruzizi hydro station (28 Mw) which suppliespower to the interconnected system cf Kivu-Rwanda-Burundi, and frc.a -n olddiesel station (5.5 Mw) in Bujumbura which is used as a standby. Theoutput of the Mugere station may be reduced to 2 Mv in summer because ofthe lack of a storage reservoir. There are also many small hydro anddiesel plants installed at isolated missions, farms, hospitals, and teaestates. Electric power from the Ruzizi I station in Zaire is supplied toBujumbura via a 70 kV transmission line 115 km long, and a substation inBujumbura owned and operated by the Zairian power company SNEL and from theMugere generating station via a 35 kV transmission line (25 km). Thecapacity of the Ruzizi I-Bujumbura line is about 9.5 MW and was reached in1981. The substation needs to be rehabilitated. Regideso's 30 kVtransmission lines total only about 36 km. A 15 kV transmission line,owned by SNEL, supplies power to Uvira in Zaire from the Bujumburasubstation. The total length of the transmission and distribution networkis about 420 kms. The inadequaote coverage and unreliability of the networkare at present among the main constraints on the development of the powersector.

35. Power Demand. Since 1979, the average annual growth in demandhas been about 13%. The greatest increase has been in demand fromindustry, which reached 17% annuallv in 1980 and 1981, and 43% in 1983.Growth in the domestic sector has averaged about 11% annually since 1979.Total consumption rose from 35,828 MWh in 1979 to 57,815 MWh in 1983, whilethe peak demand increased from 7.1 MW to 12.0 MW during the same period.Total sales of Regicaso are projected to increase from 74 GWh in 1985 to116 GWh in 1969 at an average annual rate of 11%.

Regideso

36. Regideso is a parastatal company which is responsible for thegeneration, transmission and distribution of electricity; and for thepumping, treating and distributing of water in urban areas. Regideso has amonopoly on che distribution of electricity the country, but in fact itonly operates in the urban centers of Bujumbura, Gitega, Muramvya, and

- 13 -

Bururi for electricity and in these and six other towns for water. Theelectricity and water operations were organized jointly originally, becauseof the scarcity of qualified management personnel. Electricity and wateraccounts have, however, been separated. Now that the organization hasgrown, the advisability of separating electricity and water operationsshould be reviewed. Regideso operates under the supervision of the MPWEMthrough a Board of Directors. The Board is carrying out itsresponsibilities in a satisfactory manner without excessive Governmentinterference. Rowever, major investment decisions are made by the MPWEMand tariffs are decided by the Government. The present general manager wasappointed to his position in March, 1985. He had previously been technicalmanager for eleven years, in which capacity he proved to be competent andefficient. In general, the responsibilities of the senior staff membersare carried out in a satisfactory manner but their support staff lackappropriate skills in marketing, accounting, budgeting and forecasting.Currently four expatriates, two senior advisors and two technicians,financed by the Federal Republic of Germany, work for the electricity andwater divisions. Regideso employs a total staff of 636 which is aboutaverage for its size as an electricity and water utility in Africa; but theratio of staff to consumers, now 1:18, needs to be reduced. The financialsituation of Regideso is weak. In 1983, the financial rates of return onrevalued assets for electricity and water operations were 2.1% and 5.8%,respectively, resulting in an overall low financial rate of return of 2.8%,reflecting inadequate electricity tariffs and high operating expenses forboth electricity and water. The current ratio of 2.6 reflects theexcessive level of receivables for consumption of electricity and water,which were equivalent to eleven months of billing as of December 31, 1983.The debt/equity ratio in 1983 was 61:39, which is high. In July 1984,Regideso retained the services of a consulting firm to carry out amanagement diagnosis and define methods to improve Regideso's accounting,finance and investment planning, financed under the Project PreparationFacility. The report was completed in March, 1985.

Rural Electrification

37. Rural electrification is the responsibility of the RuralHydraulics and Electrification Department (DHER) of the Ministry of RuralDevelopment, which was created in 1979. Since then, it has successfullybrought into operation 5 mini-hydro generating stations (0.05 to 0.24 MW),two diesel generating stations (both 0.09 MW), and about 27 km of subtrans-mission and distribution lines. Two new generating stations are underconstruction as well as about 16 km of transmission lines. There is littlecoordination between. DHER and Regideso. The selection of projects 'sgenerally determined according to the lending agency's preference. Uponcompletion of works, the operation, maintenance, and financial obligationsare left to the recipient, i.e., hospital, school, or local governmentagency, with the result that the maintenance is sometimes inadequate, andfunds for replacement parts are not available. One of the tasks of themanagement assistance to Regideso under the Project, would be to makeproposals regarding control of project selection and operation.

- 14 -

The Government's Strategy in the Power Sector

38. The strategy of the Government in the power sector has been toreduce its dependency on foreign sources for the supply of electricalenergy, which it regards as being vital to the economy and the security ofBurundi. Thus it has given top priority to the development of the Rwegurahydroelectric project which in IDA's opinion was not the least costsolution but is located within Burundi's borders. Burundi also decided toparticipate in the Ruzizi II regional project which will be needed to meetprojected demand in Burundi from 1990 on.

IDA Strategy in the Power Sector

39. The Association's objectives in the power sector are: (i) tohelp create a sound and efficient power supply organization throughtraining and substantial upgrading of its managerial, financial andtechnical performance; and (ii) to support the least-cost expansion, inparticular through regional cooperation, of electric generating capacityand the supply of electricity to unserved areas of the country. In supportof these objectives, in 1983 IDA participated in the financing of theregional Ruzizi II Hydroelectric Project (Credits 1419-BU, 1420-RW,1421-ZR). Funds for comnlementary works for the rehabilitation andexpansion of the Rwandese dlectricity network were approved in June 1984(CR 1495-RW), and Zaire has requested funds for similar works in the Kivuprovince; the proposed project would allow Burundi to make optimal use ofpower from the Ruzizi II regional plant.

PART IV - THE PROJECT

40. The proposed project was prepared by Regideso with the assistanceof consultants (Electricite de France International, France) and theAssociation. It was identified in October 1982, prepared in July 1983 andappraised in June/July 1984. A report entitled 'Burundi Power Transmissionand Distribution Project" (No. 5312-BU, dated April 18, 1985), is beingdistributed separately to the Executive Directors. Negotiations were heldin Washington from March 27 to April 1st, 1984. The Burundese delegationwas led by Mr. Simbarakiye, General Manager of Regideso. The main featuresof the credit and project are given in the summary at the beginning of thisreport and in Annex Ill.

41. The proposed project would assist the Government in: (a)extending Burundi's transmission and distribution network by (i) improvingthe reliability and supply of electricity to Bujumbura and its environs,and (ii) extending the availability of electricity to yet unserved markets;(b) strengthening the financial performance, management and power planningfunctions in Regideso; (c) providing technical assistance services toobtain the most reliable and least cost arrangements for oil imports; and(d) continuing the stove dissemination program started under the UrbanDevelopment Project (CR 1049-BU). Feasibility studies, tariff andmanagement studies, and assistance to Regideso for the bidding and analysisof tenders were financed under an advance from the Project Preparation

- 15 -

Facility. Regideso would be responsible for the Laplementation of thepower transmission and distribution component. The stove component and thepetroleum import component would be under the responsibility of the MPWEM.

Project Description

42. The project would include:

(a) Extension of the Transmission and Distribution System

- construction of a 110 kV transmission line connecting theRuzizi II hydro plant to the Burundian network, and of 110/30kV substations in Bubanza and Cibitoke, two 30 kV subtransmis-sion lines (42km) to supply the regional towns of Rugombo,Mparambo, Mpanda and Muzinda, a 15 or 30 kV feeder to Katumbaand distribution networks in these towns;

- extension of the low voltage distribution network to low-income districts of Bujumbura.

- rehabilitation of the Bujumbura substation andBujumbura-Ruzizi I transmission line.

(b) Technical Assistance and Training to Regideso

- consulting engineering services for construction works;

- management assistance;

- establishment of a training center and technical assistancefor the training of staff;

(c) Technical Assistance to the MinistrU of Public Works Energy audMines

- continuation of dissemination program for improved charcoalstoves in Bujumbura; and

- assistance to the Government in devising strategies to importpetroleum products at least cost.

Transmission and Subtransmission Lines

43. Feasibility studies concluded that the proposed route from RuziziII to Bubanza and Bujumbura (see map 18517) for the transmission line wasthe least-cost solution. The line would cross the Zairian and Rwandeseterritories. It would be a coadition of effectiveness of the credit thatBurundi has obtained from Rwanda and Zaire rights sufficient to allow freeaccess to their respective territories as necessary for the construction,operation and maintenance of the transmission line (Section 6.01(e) of thedraft Development Credit Agreement). The 30 kV subtransmission lines wouldsupply Rugumbo and Mparambo from Cibitoke (21km), and Mpanda ana Muzindafrom Bubanza (21km).

- 16 -

Cibitoke and Bubanza Substations

44. Additional switching and control equipment would be provided atRuzizi II to permit power to be transmitted directly to Burundi. Anintermediate substation at Cibitoke would contain a 110/30 kV transformerwith the necessary switching and protective equipment with provision for a30 kV line towards Mparambo and Rugombo in tne north. The major switchingstation at Bubanza would provide for the incoming 110 kV lines from Rweguraand Ruzizi II and one outgoing line to Bujumbura. Space would be providedfor a second line to Bujumbura, for extension of a 110 kV line to Matongo,a potential mining center, and to Gitega. Two 110/30 kV transformers wouldbe provided, one for local supply and the other as a stand-by.

Distribution Extensions

45. About 13 km of 10 kV, and 100 km of 400 kV distribution lines,and 30 transformers would be installed to connect 3,300 new consumers insix low income districts of Bujumbura. To develop the distributionnetworks in the regional towns north of Bujumbura. about 20 km of 400 kVlines and 21 transformers of various capacities would be installed toconnect about 360 consumers. The town of Katumba, about 15 km fromBujumbura would be provided with electricity from the Bujumbura-Uvira line,owned by SNEL, by a short feeder line.

Bujumbura Substation and Bujumbura-Ruzizi I Transmission Line

46. Rehabilitation needs of the Bujumbura substation and theBujumbura Ruzizi I transmission line, now owned by SNEL, would also befinanced from the proposed project. The transfer from SNEL to Regideso oflegal rights adequate to protect the interests of Regideso and theAssociation would be a condition of disbursement for this component(Schedule 1, 4(b) of the draft Development Credit Agreement).

Consulting Engineering Services

47. Regideso would employ engineering consultants satisfactory to IDA;(a total of about 110 staff-months) for the preparation of bid documents,evaluation of bids and construction supervision for the power transmission -

and distribution components (Section 2.06 of the draft Project Agreement).

Management Assistance to Regideso

48. On the basis of the conclusion of the management study, Regidesois preparing an action plan to strengthen its management performance and toimprove its administra..ive and financial operations. It would be acondition of effectiveness of the credit that Regideso and the Associationhave agreed on this plan of action (Section 6.01 (b) of the draftDevelopment Credit Agreement). The action program would be implementedwith the assistance of a management team, to be employed by December 31,1985 (Section 2.07 of the draft Project Agreement).

- 17 -

Invastment Program and Studies

49. With the assistance of the management team, and of an engineeringconsultant, a ten year least-cost development plan for investments in theelectricity sector, would be prepared. This plan would take into accountpotential regional projects and demand, would be prepared by June 30, 1986taking into account the views of the Association, and thereafter would bereviewed with the Association annually (Section 4.03 (a) of the draftProject Agreement). Regideso would not, without prior consultation of theAssociation, commit itself to any single capital investment in excess ofUSO5 million and would ensure that every Investment in the electricitysector would be economically and financially justified (Section 4.03 (b) ofthe draft Project Agreement). A study for defining optimal standards andcharges for electricity connections would be prepared by June 30, 1986,reviewed with the Association within three months, and its recommendationsimplemented promptly after completion of such exchange of views (Section2.09 of the draft Project Agreement). The project would also finance atariff study in 1987/1988, a revaluation of Regideso's assets at the end of1984, and the audit and revision of Regideso's account for 1984. Auditsfor 1985 and beyond will be financed from Regideso's own resources.

Training

50. Regideso does not presently have a training program. The projectwould finance the building and equipment of a training center and technicalassistance to train the staff of the Technical and of the Administrativeand Financial Departments. A Manager of Training and three trainingspecialists and their counterparts satisfactory to the Association would beappointed by October 1st 1985.5 and would initiate prior to September 1,1986, a training program satisfactory to the Association for theelectricity department and the financial and administrative services ofRegideso (Section 2.08 of the draft Project Agreement).

Technical Assistance to the MPWEM

51. Charcoal Stoves. This component would continue in 1987 and 1988the stove dissemination program which is to be launched under the ongoingUrban Development Project (para. 31).

52. Petroleum Imports. The project would finance the services of anadvisor to MPWEM, to be employed by December 31, 1985, who would assist informulating strategies to obtain imported petroleum products at least cost,develop pricing policies for the sale of these products within Burundi, andtrain staff of the Ministry (Section 4.02 of the draft Development CreditAgreement).

Cost Estimates

53. The total project cost is estimated at about US$21.8 millionequivalent, excluding interest during construction, of which US$17.0million (78%) are foreign costs and US$4.8 million (22%), local. Interestduring construction would amount to US$2.7 million. Physical contingenciesof 10 were added to each component to provide an allowance for unforeseen

- 18 -

increases in the volume of work. Price contingencies were added on localcosts as follows: 1985:18%; 1986:12%; and 1987-1988:10%; and on foreigncosts as follows: 1985:5%; 1986:7.5%; 1987:8%; 1987-1988:8%. In addition,the eftect of the estimated difference in the domestic and internationalin-'lation rates on the exchange rate of the BuF to the US$ over theconstruction period of the project, was computed and added to the foreigncost in the BuF tabulation. The cost of engineering services is estimatedto be US$1.0 million of which US$0.8 million would be in foreign exchange.The cost of the services of the management team would be about US $0.8million. A summary cost table appears in the Project and Credit Summary.

Financing Plan

54. External financing, totalling US$19.6 million, would cover 9O0 ofthe estimated project cost, representing 100% of the foreign exchange costand 53% of the local cost equivalent. Base costs are in January 1985prices. The IDA credit of US$12.9 million would finance 56% of theestimated project costs and about 72% of the estimated foreign exchangecomponent. The IDA credit would finance the construction of thetransmission line and substations, engineering service, managementassistance, part of the training component, the services of the petroleumadvisor, the cookstove program, and studies. It is expected thatcofinanciers would provide US$7.3 million equivalent. The CCCE wouldfinance distribution extensions in Bujumbura and the construction ofdistribution extensions to the regional towns. Belgium is considering thefinancing of the 30 KV subtransmission lines. The Federal Republic ofGermany (GTZ) would provide technical assistance services and equipment fortraining. Interest during construction amounting to US $2.7 million, wouldbe financed by the Government. The Government would lend to Regidesoshort-term funds necessary to meet the local costs of construction underthe project. These funds are estimated at US$2.1 million equivalent, to berepaid by Regideso in four years (Section 4.01 of the draft DevelopmentCredit Agreement). The fulfillment of all conditions precedent todisbursement of cofinancier's funds would be a condition of effectivenessof the credit (Section 6.01 (d) of the draft Development CreditAgreement).

55. The proceeds of the IDA credit allocated to therevenue-generating power component (US$12.0 million) would be relent by theGovernment to Regideso for 20 years, including a five year grace period, atan interest rate of 9.29 percent. Regideso would bear the foreign exchangerisk. Signature of the Subsidiary Loan Agreement between the Governmenta/d Regideso would be a condition of effectiveness of the Credit (Section6.Vi (a) of the draft Development Credit Agreement).

Procurement and Disbursement

56. The materials and equipment including construction services, tobe financed by the proposed Credit would be procured in accordance with theAssociation's guidelines. The planned procurement procedures aresummarized in Annex 4. The selection of experts and consultants would bein accordance with the Association's guidelines. The proceeds of theCredit would be disbursed over five years on the following basis: 90% ofthe total cost of the contracts for the 110KV transmission line, and the

- 19 -

Bubanza and Cibitoke sub-stations; 902 of the cost of construction andequipment of the training center; and 1002 of the foreign cost of theservices of the petroleum adviser, of the cooking stove program, and of theengineering services, management assistance and studies. In order toensure that funds would be made available when needed, a Special Account,operated by Regideso and financed by the project, would be established inthe Bank of Burundi. An initial deposit of US$500,000 would be made fromthe Credit at the time of effectiveness; the account would be replenishedon the basis of documentary and other evidence, to be provided to theAesociation by Regideso, of payments made from the account for goods andservices required for the project (Section 2.02 Cc) and Schedule 3 of thedraft Development Credit Agreement).

Regideso's Finances

57. Tariffs. Electricity tariffs were last increased by 20 percentin January 193 This increase is adequate to meet project and investmentrequirements and yield a rate of return on net fixed assets of 3.82 in1985, which would be an improvement over the 1984 performance. Regidesoand the Government are now reviewing the tariff structure for electricity,one of the objectives being that the average tariff would progressivelyincrease and approach the long run marginal cost of power by the mid1990's. On the basis of this review, a new tariff structure, acceptable tothe Association, would be established and become fully effective by January1, 1986 (Section 4.04 of the draft Project Credit Agreement). Thereafter,Regideso and Government would review the tariff structure annually, andmodify tariffs as necessary to produce revenues sufficient to earn theagreed rates of return on net fixed assets of not less than 4.0% in 1986and 1987; 4.5% in 1988; 6.5% in 1989; 8% in 1990 and thereafter (Section4.05 of the drafE Project Agreement). Water tariffs would be revised eachyear to levels necessary to ensure that revenues from water supplyoperations would cover operating expenses and debt service and provide areasonable contribution to the water supply investment program,representing no less than a percentage of overall capital expenditures overa three year period as determined in the tariff study being carried outunder the Bujumbura Water Supply Project, financed by AfDB, and agreed withthe Association (Section 4.06 of the draft Project Agreement).

58. Arrears. As of December 31, 1983 total receivables forconsumption of electricity and water were equivalent to eleven months ofbilling. The amounts of receivables for electricity and water consumptionwould be reduced to six months of billings by the end of 1986, and fourmonths of billings by the end of 1987, for Government and municipalities,and would be reduced to four months of billings by the end of 1985, andthree months of billings for clients billed each month and four months ofbillings for clients billed every two months by the end of 1986 (Section4.08 of the draft Project Agreement). Agreement with the Association on anaction plan to reduce Government's and municipalities arrears would be acondition of effectiveness of the Credit (Section 6.01 (c) of the draftDevelopment Credit Agreement).

- 20 -

59. During the period 1985 to 1989, total sales of Regideso areprojected to increase from 75 GWh to 116 GWh at an average annual rate of11%. Electricity tariffs are expected to increase in real terms at anaverage annual rate of 10.5X. The operating ratio would decrease duringthe period from 77X to 57Z, because of the tariff adjustments and bettercontrol of costs. Based on its recent performance, Regideso may havedifficulty for the next two or three years in generating adequate funds tomeet its cash requirements and finance its investment program, and may haveto undertake short-term borrowings from the Government or other sources toensure coverage of all operating and capital investment needs. AsRegideso's present debt coverage performonce is only marginally acceptable(para. 36), Regideso's total indebtness would be monitored carefully andRegideso would not incur debt unless internal cash generated for the twelvemonths preceding incurrence of the debt is at least 1.5 times the maximumdebt service requirements for any succeeding year (section 4.07 of thedraft Project Agreement).

Accounting and Auditing

bO. Regideso would have its accounts audited annually by anindependent auditor acceptable to the Association, and would submit to theAssociation the audited financial statements and auditor's report as soonas possible, and beginning in 1986 no later than six months after the endof the fiscal year (Section 4.01 (b) of the draft Project Agreement).Regideso would continue to maintain separate accounts for its electricityand water operations and would incorporate therein an annual revaluation ofits fixed assets in operatioa (Section 4.02 of the draft ProjectAgreement).

Economic Benefits

61. Construction of the transmission line is part of the regionaldevelopment program started with the construction of the Ruzizi project.Therefore the economic rate of return for the project has been recalculatedfor the overall regional power development program, on the basis of thecost of the hydro facilities and the transmission distribution networksplanned for Rwanda, Burundi and Zaire, and is estimated to be about 8X,based on an average regional increase of 10% in the demand forelectricity. This is however, a very conservative estimate of the trueeconomic rate of return since there are consumer benefits which are notcaptured in this estimate and which derive from the availability ofhydropower rather than higher-cost, diesel-generated power that someconsumers would be ready to buy. Feasibility studies have concluded thatthe proposed route for the 110 kV transmission line represents the leastcost solution. For the substations and subtransmission lines anddistribution in regional towns, economic analysis was carried outseparately for three project groups, and the following rates of return wereestimated; Cibitoke: 17X, Bubanza 11%, and Katumba 11%. The rates ofreturn of the proposed distribution extensions for low income districts ofBujunbura were found to be as follows: Cibitoke, 1OZ; Bwiza, 20%; Buyenzi,14%; Kinama, 10; Musaga, 13%; Kamenge, 15%.

- 21 -

Risks and environmental considerations

62. The physical risk associated with this project would be smallbecause the construction of the transmission and distribution facilitieswould use commonly known and well-tried practices. The main risk would beinstitutional, as Regideso Is a weak organization and may have difficultyin managing the proposed project. However, this risk would be minimized bythe use of competent consultants to assist Regideso and by the recruitmentof a management assistance team. The training component is expected toincrease staff skills, particularly during the later stages of theproject. The effects on the environment would be minimal.

PART V - LEGAL INSTRUMENTS AND AUTHORITY

63. The draft Development Credit Agreement between the Republic ofBurundi and the Association, the draft Project Agreement between REGIDESOand the Association, and the Recommendation of the Committee provided forin Article V, Section 1 (d) of the Articles of Agreement of the Associationare being distributed to the Executive Directors separately.

64. Special conditions of the project are listed in section III ofAnnex III of this Report. Special conditions of effectiveness would be:(a) agreement between the Association and Regideso on an action plan tostrengthen Regideso's management; (b) agreement between the Association,the Government and Regideso on an action plan to reduce the Government'sand municipalities arrears; (c) assurance that Burundi has obtained rightsnecessary for the construction, operation and maintenance of thetransmission line. A special condition of disbursement against therehabilitation of the Bujumbura substations and Bujumbura-Ruzizi Itransmission line, would be the transfer of legal rights from SNEL toRegideso.

65. I am satisfied that the proposed Credit would comply with theArticles of Agreement of the Association.

PART VI - RECOMMENDATION

66. I recommend that the Executive Directors approve the proposedCredit.

A. W. ClausenPresident

Attachments

Washington, DCApril 18, 1985

22 - AIGAnnex IT A L e 3 Page 1 of 5

URNIDI - SOCAL INDICATORS DATA SHECTmUIDI RBMSESCS =FOUPS (tBbfhlT"D AV ) La

OIITS (MST aNCUT ESTDIrAC ) lbRCNTi LOW INCOM11 AFPRICA MIDDLE T m

196bt i97aLe ESTWATLb SOUTM or SAHARA ARxCA *. or SAHARA

A L (TuSm Q-. u)TOSAL 27.8 27.9 27.8ACRICULTWUAL 15.6 19.8 22.3

C1rn CAPW u (cum 60.0 110.0 280.0 l/ 249.1 1112.9

mcT aumumwiou MR CPITA(KILOS A W OP OIL EQUIVALENT) 6.0 7.0 15.0 62.6 59.0

FOPILATIOEAD AVITA STATICSPOPULATION.NID-TYR (THOUDS) 2927.0 3350.0 4346 0URDA POPULATION (2 o0 TOTAL) 2.2 2.2 2:4 1/ 19.2 29.7

POPULATION PRO3ECTIONSPOPULATION IN TA 200 (HILL) 7.4STATIONARI P')PULATION (HILL) 26.7POPULATION YOM 1.9

POPULATION DENSITYPER SQ. It. 105.2 120.4 1-2.0 3/ 32.5 55.9PER SQ. Wt. ASh. LAND 188.2 179.2 190.0 119.2 111.5

POPULATION ACE STRUCTURE (XC0-14 RltS 42.6 43.8 44.2 45.6 45.4

15-64 YRS 54.6 53.2 52.7 51.5 51.761 AND AOVE 2.9 3.0 3.1 2.9 2.9

POPULATION GROTH RATE (2)TOtAL 1.6 1.3 2.2 2.8 2.aURAN 1.8 1.3 2.8 6.2 5.2

CRUDE BIRTH RAE (PER TNCUS) 45.2 46.3 46.5 49.6 47.0CRUDE DEATH KATE (PER THOUS) 25.2 24.3 19.2 17.7 15.2GROSS REPRODUCTION RATE 2.7 2.9 2.9 3.2 3.2

FAMILY PLUWNGACCEPTORS, NUL (TOUS)USERS (Z OF HARED WCN) .. .

FOOD AM N7rIe=NINDEX OF FOOD PROD. PER CAPITA(1969-71-1Wo) 103.0 100.0 96.0 85.6 91.6

PER CAPITA SUPPLY OFCALORIES (I OF REQUIRENrS) 95.0 102.0 95.0 86.4 98.2PRTINS (GAMS PER DAT) 59.0 63.0 60.0 49.9 56.7

OF 1IUCH ANMAL AND PULSE 29.0 31.0 31.0 /e 18.3 17.0

CHILD (ACES 1-4) DEATH RATE 31.0 29.4 23.5 23.8 1J.7

HEALTHLIFE EXPECT. AT BIRTH (YEMS) 38.6 41.5 46.5 48.4 51.7INFANT HORT. RATE (PER TOUS) 143.0 136.0 123.0 117.5 102.7

ACCESS TO SAFE WATER (ZPOP)TOTAL .. .. .. 21.8 35.6

URIUN .. 77.0 94.0 1d 61.5 54.1RURAL .. .. .. 14.2 27.3

ACCESS TO EXCITA DISPOSALCZ OF POPULATION)

TOTAL .. .. .. 32.0

URBAN .. 96.0 95.0 Jd 69.2RURAL .. .. .. 24.8

POPULATION PER PHISICIAM 989D0.0 5530.0 45020.0 la 27477.6 11948.3POP. PER NURSING PRS0N 4640.0 7490.0 6180.0 77 3396.2 2248.9POP. PER HOSPITAL BED

TOTAL 900.0 740.0 .. 1019.0 986.9URMAN 30.0 110.0 .. 395.2 368.7RURAL 3810.0 1070.0 .. 3094.0 4012.1

A#MtSSIONS PCR HOSPITAL BED .. ..

AVERAGE SIZE OF HOUSEHOLDTOTAL .. .. 4.3 /dURBAN .. .. 5.57dRURAL .. .. 4.3 7

AVERAGE NO. OF PERSONS/RO0HT0TAL .. ..

UBrN .. .. . ..

RURAL .. ..

ACCESS TO ELECT. (Z oF DOELLINGS)TOTAL .. .. 0.6 Id

URBN .. .. 22.5 7.; ~~~~RURAL .. .. . ..

- 23 - Annex ITAIL! 3I Page 2 of 5

JWUIIDS ~~~- SOCL'L 7 1 .

mi ~ MeWJT t"D t xusm AlAos]L

ADJUUSD HLRLh RATIOSPIAY TAL. 16.0 29.0 32.0 69.2 91.0

HALE 27.0 31.0 40.0 71.6 90.3L 9.0 19.0 25.0 37.6 73.6

*ICOUDARYa TOTAL 1.0 2.0 3.0 13.1 17.4KALA 1.0 3.0 4.0 17.6 23.7DOULI 1.0 1.0 2.0 8.3 14.5

VOCATIONAL (Z OP SZCONDT) 35.0 13.6 15.7 7.2 5.3

PUflLX-TAOIE PtATLOPRIMARY 36.0 37.0 39S0 46.1 36.6*SCGNUtAY 15.0 11.0 2160 /c Z5.9 24.3

ADULL LITERACT RATE (Z) 13.9 Lf .. 25.0 44.3 35.6

PASSCBENR CARS/TROUSAND POP 1.0 I.I 1.3 I 3.6 20.7RADIO RECEIVERS/TNOUEAND POP .. 19.4 36.5 41.9 100.8TV ECEIVERBTOUSAND POP .. .. .. 2.0 1.NEWSPAPER (SDAILT GENEAL

INTEREST-) CIRCUTIONPE THOUSAND PONILA1TON .. 0.1 0.4 | 5.4 17.2

CINDI AUIAL ATTZNDANJCZCAPITA 0.1 /f 0.0 0.0 1.4 0.3

TOTAL LA FORCE (THOUS) 1534.0 1676.0 2032.0FDIALE (PERCENT) 45.9 45.3 44.6 36.5 33.6AGRICULTURE (PERCENT) 90.0 67.0 64.0 77.4 57.1INDUSTRY (PERCENT) 3.0 4.0 5.0 9.8 17.4

PARTICIPATION RATE (PZRCEZT)TOTAL 52.4 50.0 46.8 41.0 36.3HALE 56.3 56.0 53.2 52.1 47.6FPUKLE 46.9 44.4 40.6 30.2 25.1

ECNOMIC DEPENDENCY RATIO 0.9 0.9 1.0 1.2 1.4

PERCENT OF PRIVATE IlCaURECEIVCED F

HICHST 52 OF ROUSEWLOS ..HICGEST ZO OF HOUSEHOLDS ..LowEST ZOS OF SOUSEIS .. ..LOWEST 40S OF HOUSEHOLDS ..

ESTIMATED ARSOLUTE POVRY INCOMELEVEL (US$ PER CAPITA)

URSAN .. .. 213.0 /b 16S.3 525.3RURAL .. .. 136.0 90.8 249.0

ES1I1MTED REIATIVE POVERTIY INCOMELEVEL (Uss PER CAPITA)

URBAN .. .. .. 107.7 477.4RURAL .. . 37.0 lb 65.0 186.0

ESTIMATED POP. ILW ABSOLUTEPOVERTY INCOME LEVEL (2)

URBAN .. .. 55.0 /h 34.7RURAL .. .. S5.0 7E 65.4

.. NOT AVAILABLENOT APPLICABLE

N O T E S

/a The group averages fo; each indIcator .re pnpulation-vagbhted arithtmtic mamn. Coverage of countrIes mog theIndIcators deped' on avsilabilicy of data and la not unlform.

lb Unlearn otherwise noted, -Dots for 1960- refer to any year betwee 1959 and 1961; 'Data for 1970" between 1969 and1971; and data for "Mot Decant Estimte" between 1980 and 1982.

/c 1977; Id 1979; /s 1975; /f 1962; I, 1976; l 1978.

The following figures reflect the mat recent ailable *asmteat JUNE. 1964

11 240; 2/ 5; 3/ 155.

- 24- Annwx Immcci cliatic at. es sec at, Its .aet ~eatewMenvee V Ic-Mgeccca a, * a-ge=. of 5me...4&1"& IISAI....4M fl-Plro"0..Miv I.ol.t ec caebce4lmle icdI ntilb.. it cale"' m'sc em aced tUa hat I is.- ef.tmt.wadiaccmlo.

aancptlc es.aa ci le cwl aiadeeled altal leaad mcapt.acadby dl-.ianasci-ac a. sllVetmu em d... l atams Ie.caaahalsa. marae decit.sedn a cgladi meIc. caicad. tad itpecieecc earltsi calc deticracts. Iecac a.c- ec.

lb. nea.- d n sac NItL at. e- -atipY NOcW.. atM-1a. a -ia .'Vc -d Ill sicacets ceast tickcaat heat.. ceae.e L.csi thea th -clay cdow ci lb-ecbsa itchy maccpa far Nio la-cat I lcpn.ra aesap Moec 'IldcTasttcvc m et o seaaba.. lscI Icc.clac

atetmilat. Cc- chapcleaeasea jar. eta Poorn. N .si Ppclels CeWtm I sLeaosli Sm.-d fat catb 6 i lets, Nl sd ac. -dci. mic laltec, S at.l .eaea.ea "Irag t. dee. .e etc easeealar isa th aeci, ciW. aThee.acea at.- . lilac dINaad aI. c-ccl take Il t .1 dc.tOlic aie.ci.t cc ha

eatecd e aset sand spI.Ia- ew-ee - salSLAM. ooe. ssci act, n i'i.I Icapaateaac F- ads... MaCace-s-at Iii tsalkpda

laeala dccco.-klwSua ,I.fi. .. fmaltlmc cm J- ata1l,;Ptai aamcl tea wcaht. esa

slateCI%I c- seleten WI e tecreareM m-- sesci mr-Sate ca las. arciacs. psetat. sceleas se- paei eSeca. ca

eat.. w l ors mice 'as.. kwal.1 IAcjfisttiL.a IM~ a..I... ...ced icE-t peas NIcci elct 0

stm ea-rcreu eeal.a wea aee ics aett eam S meta Not1mg.maac tadW ' pe WetPadS leisttll tad

1.. P.1.1- NNSW a VaSal kt"...ace..emm"mat Laslrsc tal. iaplIet.. beer.- ealed -- PSIth ad.

s.d -aalaasIaateeae maLmeecaO.. oe all sqtsac Aptem JaIM. p-eaei S emeiaad eases ̀ N1 -Iat-I e tamlmla..

writ. tad ltam a. 2" M1 97t 0ate eU k di Nc. aws."c ta..

MOI M s p M _RR a .) Ac c I.m mc maca. maac. cci ma ma

lwb. ;.qtt. .11 MN t. t.:,R.p4q.3 sqataalatt.d caaaa r ectts.- ssasar..Ia ema&icaadctteea i ck.- -v cNeO mpeailcm dii sa eamesit maltNPI. A 1esedir-mda me--a a aiddI

eciceefitc lice man, u ad Vides. t.-mv atldrcaclimel-a .rpcI

tnisle!Nlafllaa. isseact~~~~~~~1 mes. ersca. t ce e. ccess Mata aMahmiSiUeia,aif5all -allct Peadtett peatieca" eta keamd -tlowm pnam tr em mctchs. adne I. stptdccaal"WRIU MMuth- sa -aII a that, -- smm, cad lang LA., doatlmsara. nMeamaamit. balca asee a-aiamee .aaea o

Inice. Pacjeall pNNNN-ten Par maeNI.tlp Nesit-s & c ct. thin oaccipitd0 peesa.

-aSt..9 lpL-L.et C-a.iact LI t, siteoPa te11A ae.9. t .1.m me -ta-d, atIat aeseam dctie : scactlate.N Io

esl cias isll r. op l if=lt1"i leach ice P-J-ilma Pp"eaa. ace 1callte ftee iItJaginsa C a I Su as- at m-apaccite maeet 1w_jlStmmadatsateCa ea et.mt. a acacl

iii IeiesMaccd- an INEa PIced. NtA. ta-apeteis accee setaatimaae ali aette last a.pres f 51recct.I,ccce hea aNI-altsa-SLr iaalaad Mtepltasa laat fa-lts peemafotoaaal'-as pPdIematI acate maccads e4edn_ nd c-amrwapeabit, ease-mi. it cast c papalotts. cha tIck peta Is -ma.t- pac. It ldfar dmiin"ctl meNact. at Po=ea chettlta fead sceat cm ci. decO sea.. Its9 adcirceta Lc st-a P-sal. ad it. C-a'llrso meat mamlcec edcetcc a 4cllsrl as. aaacd it.psat-eIkel I"i.i.cStse aeslacmasslcse t l a pWpets eva hals- Wtea tea aticeisl aa.tI as.

hata r Lch Pcajac,d11 It- sticielc ta c I paasacs It ct.-t -sc iccd..ccI- cd em a set am o taiaacdWas, af Wat.re.ad daatiaarcitaemmc eaac clcem a edarlec mpclic - saa Cci pn 51antIprcte 'IN-I all

Pasames L"n sacte - it It. M"."si fe pNW.mcse death I. ceaem P_:a.ad. 2-smt eaelat emttpatca em Coi.e

marane Saaaea1 heam aacctdasnt Nlsme. tsstpItm acalaca imet. , anet4- mscmm ctras

t'aa Scaeaels eta Carl II. easas satetrasII maa etc e*t ttaeadetem ccrsc ea.Pmdaltla.ca.cmmc. tht ea.eesm.eahaa.ti tSor. c.Sra-el. .etattaataIe

Novit .tece. tcaavadarae- aa ma.aeN me e-.amc h

as. e. I`144.pd I eiai.cma .at citatiea i5heetc aaeetpshd l5aIm-..c-..

IapII ha. crstwi a --C tda htIc dcrmtmttet ta S ptaWct 'L..siad pvlaeItt Seed 1%it . Wa asi s.sit Wm. ear NaImU des..

vamittamis iticeaa meecl f- CIlidea il-1t yat). macmrma-a ti- UapI

taalsc,minc. lmc,. a' mS dtee. eae Lccta teat ta ame aem:.atdi-hesea eea. cadicaittlc Cecat tea. (ettssL -Ng Iat. si eatmi ...s1a add- sfltacy7 tatesla.o

pac pala Sa.c dao. tii-dm le ma zc) ad. le-eese Cas- mt tlia 5 a am _I_f .4 .ceacie se

Palotact Cial teVi esa ra -jaee ac n.cc cet.e~;- - ha.set 5 ae! I pe t- S. i h p.ali.-gamaisadsCadscle t e tar eniUd) - a It-lc tInt. ar eha-a .i SON- s- ma t. acastt ac.e. No i-ts panN; ma, alt he etpsi I-es mat

Pam picacaalsl lta 5~~a ad iii)d-. asa-elac ske1Icd eLsecata,Ceada ttt les iccesteccede I a -i ac. per tIsa-d cI sdl--pa %-tatsaal t.Wa ct-LICsI- TV -&-toce fa icdn

"actlctfci Wt etestdiaMAsM! Acis tav tasen ccctLc aI tM mteadp crccWr= eaeat.hs en matNI.a If dattlan " nsit MaSt en S-isne a .sapat a.6 ragtte-I=La ra a ai l

taNco!cpflta &-Mis sea.i.ccpa-aecatl ma.c tcija crtadaaiala - Use aC taaitlteelis-it taec ecemc lg ito IWeO, life, sa lestt tdti asl aee cmpa`d-la peac

P,M t lmmc-isaaa c ebae cs -a eteat haNNU daW NINNCI I.I eaSt ce leasd adMt in. csccslsew44trksattdnt.st ntpia at actees PIRY PIi.pSaai.c ita.te.)Atrd. Cielce - Vei.- len m- t d -i e

Peale pleama - tan Ic=.c ofspId e a-RN L- lweactse io ctltta -Liot tal..

sal-ce cai -hais a L.5 te atea r- arso tacead anY .Ib

tksd-ttrtda-- acvat- W (NAI- mt-si.L c-tetcat "-.P..IamMllI t No.-c. -issa -ett s as -esa me-lada NW camarla m SaCpttese 'NA M a-nd1 " e ash." ac-rn. Mr i F aL.eden 9 tws.ai. ctmcalt. s.c0.8 -ari

ise ca ascatna. sarsntlsl lace. mall ad till des.~~~~~~~~~~~~~~~~~~~~~~~~~~~,.It.-1f_ lto 170-d'a

eels d em an a-Ltat). Mivsac. piotastla SC -No Cao-tv it -dtisIp ct aSi ca reae -4Ie Lake feast mIe. sac.taaa - -stIts sea aciae el -stse. tics-e1.ta N. aof AMa a mmcm dec

ft. -c II 1Q _df....clemit I terai-mc.sI.am at rctterat c

ase c isit Ci asMZcels A'iaki INS sey as aIa e poesNWc PC tNu5. act. a Cast. WcacllM of sIt asaW ecpa"ttyi.da.loasitla cppulc ails da-a.ie eaadsaln. t-llol I=t.a W Its.i. 1mm. se_tat ddt. TM-c ca I=sa - ffla tcclsmCI- -_aI

.aPNNNIa. sad I J. it.sA. Mel -maptlac c-A."d ealsi m -o.ms.dgm ealsls a-a.raccts.. PC ate aacic d Leoc Ita te-d.AitNs-lets - ta icead salamcaac.. adl Inn Ia dlmsflt.ml-. iclc.'Pa cct.s e fin atlas se

acs.ano at.d e PS lad ac aaaistnacl a s. -l trSSJ rA- 1.0 - tell. SC pepsimea -tsr mIS sad C ted sect.

as - Nad ccc ItmIbeca PC P".elsla "1151ll le peoact. ic- -sitt taSPsId! -l.t act1-cs. If"c ad mm cc.

Pa. amaia asIc c cvc.e.t Care - ee - e'st". sc-st ci Ipoe -apita.eaa Pltciesit 1w eat sad elsE) sllcd we lcma Iam tmpply cC fan a dee m ni c ad it deltald - bcc. Ni- aes- reha Nccee. allacma so P-..ap madNaaaS 50 P.-sm PC

itm.C Car cit maeaes t.eSm!esed by ssw Pa pvod Ca Cam.k-isli i NIF man J siF act.! posecta pc dej ted 10 dieee PC seal sd

tisadah an ar cb Ibam or 71 cam cC Ist! pecoel ad it er-s Sk aiancseo n a aet tc Ca c - vc eaI-I. ..C -WAca p.c`"l -- ,sa Cc lb~ acri. leWam-d by re amc. citeid haW aepac Lft made aa-cis-

IbLS chaSe Psd sliyg iic-cici a8 tWO ds-e rstated allah Panice ama lst1m areseleM -ae. nei

ChtWid St=s 1.41 eso tie(9 testlima) - a-si death pea Itset .d Iaisiated Ilelatia P-aM .c Icea lama (gm .crtd-mk dnaas g.s a-A p S.tntlem t c.a cn s APjos it = etcgta ae A-astop lameNN &its tc-anc weaa sflec dte detacd eta U1c teh-Is tan. R70 ado il dss ancI .t ci t. Sntw- let. -Las l* d.etd iCM It. -ae

P-,W Mh- .9 WI- of lif.~ ~ ~ ~~~~~ata mikejasa c ua ma. ci1.ccI.ch as

.4*UF t-teren all USr. (castes) - mart at. ScE poalct. lad Mt.ae ttrt-eea Cpeelanmc desDa.amcalmI-r - -1Imacil its.Jad tacadlcc-

ollaseacIt -al maolt" W tat ilpama -M aria oed efis cpisa ma J masia. mat)- p7 aesslidaao _1 shalt &VApati toacaeiss_l. its.

masm it -ta ItSM asamtt s-a -Id eppir ifet. Noocai. -MONta 51 Ike ft-said de adI has o c. cNr dttpsocactisss aoll PC

S. deja is roasting a. Cadipa ems aide.

Acrc- a cec. tooqlt l(ae. cC t-Iccice) ateoc ac .. a ac

perS.ama .1 ".aI, eaafsoaecldefs.d ESe-as dllcsci o &tamE.d. sIhasiem cad 411.ersce. mitt W- cLfa SC- cItNc ees

adsat we Nalla-bce ipate - SuNo ma PIC5 pWcfles ad

- 25 -

Annex IPage 4 of 5

unT

COUNTRY DATA

27,865 kj2 4.3 zUin l l (uId 1982) 155 12 of zta ama. Agrial.te 17,20D h2 R of w8nth 2AZ (1977-2)

PaMM= UNATIOE 1980 IAUHE (17)

Crude BL8th Rate (per 1,000) 45 Pqxzatin per lIWicmi 45,02OCn.e Daath Rxte (per 1,000) 22 8,pulatio per hmspttl bd 744 (1970)

YS MD PMED MM A ID MEECIrY

Urm pqiuiatias. 2 94 2 of paplai - toa 2Z- rui MK

N nW N (1974-78) WLU= (1978-)

CalorLe izzalre - Z of zwquremms 99 Ault lteny rate Z 25.0Per capita protein a (gm/day) 61 Pdmq aduol S-rolmit Z 30.0

a/! lV CPM l IN 1983w MSM240

QCE DIISC E2= AIUL RNM OF COMM (Z, LLtr prECe)

1983 ValuSs EJnim _ 1970-77 1978-63

a1P at N)rket pdc 1,110.3 100.0 3.1 2.5Orms ltic 3iretmIt 141.1 12.7 28.3 8.4Q 1ss 9tiotu Savhv 12.6 1.1 17.7 3.1Qwvit Acoat efird -130.8 -11.8 27.5

Ecporta of Gods, GES 107.8 9.7 -1.9 5.5]qrts of Gads, GCS 261.0 23.5 7.7 6.0

Umrr. Lm icv AMl wiv Y WI Z98

Val* added r FM= V.A. per vorirer$ XLIe 1 '00 w X

4gdcultue 5a5.2 58.8 1,762 S2.3 337.8 71.5ITuskty 164.2 16.2 270 12.6 608.1 128.6

* SewIce 252.7 25.0 109 5.1 2,318.3 490.4Toth(ateruq 1,012.1 100.0 I4 100.0 7 ICO.O

(lik 1ff11 Per eiit ofGD1983 1983 1978-2

oirre wu Revm 12,858 12.5 14.6Qxet Emw um 13,470 13.1 12.0Otmit 9urpl -612 -0.6 2.6Capil lxMitue b/ 16,6% 16.2 11.6ExterLh A sta (12,424) 12.1 (7.4)

a/ At1 Imtdolaw.h Trim iMb1 epterprise, fip f po s, adet rqe*c .

* . ~~lI2t applicaleNot avalable.

Nte: AU ereiow toa In this tblde are at de avege FMO per US$ ohage ziepmaliig dmring tbo pedlal aoen,l.

- 26 -

Annex IPage 5 of 5

MU, = and ES 1978 1979 1980 1981 1982 1983

?bu am! Quindib 9,696 11,034 12,681 15,698 15,378 19,452ik cdreit bt Cutal Goveriul 1,5t8 3,860 4,496 7,178 9,344 12,355

Rank credit to Private Sector 5,835 8,367 9,793 12,760 12,976 14,570 4

(Parwite or Inded N&bers)

Nbay and (uasi-4bya Z of QP 17.7 15.7 14.7 17.6 16.8 18.9

hla I PFn e di is ln:General Price idex 27.3 25.5 12.3 12.0 5.7 8.3Blk credit to Public Sectr 715.1 156.0 16.5 59.7 30.2 32.2Book cmeit to Private Sector 115.0 43.7 17.6 29.6 0.3 12.3

BALANC OF PAf1 !SNE E 5E ((AVRAGE 1978-83)

1979 1980 1981 1982 1983 U3S tl1LiU %(Mi [US Dollas)

Exports (gWnfs) 112 74 89 108 100 CoFfee 70.5 87.8Torts (ghlfs) 193 205 20B 261 257 Cotton 2.4 2.9RPeource gq (deficlx r ) Te -a -=if = i3T 7 2.2 2.8

All otbar camt ditiL 5.2 6.5LTerest paynms (net) 4 9 7 3 4Iabor inaan -14 -16 -24 -31 -29 MM aL 803 Ii0.oNe trsfexs 34 47 48 50 45galare curent a:at -57 1 88 -131 -3

Direct fDreiga investmezs - 1 1 2 1 EMEIL Mr, m 31, 1983Capital gR1s 25 3, 39 37 40Net NX Drst a/ 39 41 29 51 94

Disbursements 42 45 32 54 98 US"nAaization 3 4 3 3 4 UbUc Debt, incl. gerantei 284.0

Otber caoptal (net) - -10 -6 -3 16 rurad Private DebtOtber ItPne NE: -11 7 -5 11 -17. Ibtal outstalin & Dlsb.

ITrreae in net xmerves (-) 4 6 32 34 -16 Sr siz RAno ap. 1983 b/ X

Gross reserves (end year) 86 90 72 42 54 PihUc DEbt, Enl. garsteed 10.0Noa kirantaed Private Debt

T9orts of pecroleun produs 13 25 32 30 29 Tbta outstdimng and disb.

IDA EMD, Septemiber 30, 1984(MLIiii0 US Dollars)

RAIE (F EMAMM- IDAChtsaemlizig & DOsbursed 125.4

US$1 - FBu 90 1976-November 23, 1983 ilsb 70.9DiztstafiInluing

SER- Fail3 aNrber 23, 193-prelent unLisbursd 196.3

a/ IBM Debt Reporting Systm.b/ Patio of Debt Seice to EBports E ods sfD d factor Servil.

Not available.

- 27 -

Annex II (Page 1 of 2)

STATUS OF BANK GROUP OPERATIONS IN BURUNDI

A. STATEMENT OF BANK LOANS AND IDA CREDITSEXPRESSED IN US DOLLARS(as of September 30, 1954)

AmountA Loan or US$million

Credit (less cancellations)Number Year Borrower Purpose Bank IDA 2/ Undisbursed

One loan 1/ and ten credits fully disbursed 4.8 45.53

731 BU 1978 Burundi Development Bank - 3.40 0.12

918 BU 3/ 1979 Burundi Forestry - 4.30 0.47

976 BU 1980 Burundi Second Education - 15.00 0.84

1049 BU 1980 Burundi Urban Development - 15.00 7.54

1058 BU 1980 Burundi Telecommunications - 7.70 2.74

1132 BU 1981 Burundi Third Highway - 25.00 3.23

1154 BU 1981 Burundi Nickel Exploration - 4.00 0.71

1165 BU 4/ 1981 Burundi Kirimiro RuralDevelopment - 19.30 11.28

1192 BU 1982 Burundi Integrated RuralDev.lNgozi III - 16.00 11.48

1230 BU 1982 Burundi Local ConstructionIndustry - 5.20 3.51

1358 BU 3/ 1983 Burundi Third Education - 15.80 10.09

1419 BU 1983 Burundi Ruzizi II Regional 15.00 13.79

1456 BU 5/ 1984 Burundi Third TechnicalAssistance 5.10 5.10

Total 4.8 196.33 70.90Of which has been paid 4.8 0.32Total now outstanding 0.0 194.46Amount sold 1.55

of which has been repaid 1.55Total now heldby Bank and IDA 0.00 194.46Total undisbursed 70.90

- 28 -

Annex II (Page 2 of 2)

B. Statement of IFC Investments(as of September 30, 1984)

Type of Amount In USS MillionYear Obligor Business Loan Equity Total

1981 Verreries du Glass container 4.8 0.8 5.6Burundi

Total gross commitments lesscancellations, terminations,repayments and sales 4.8 0.8 5.6

Total comitmeDts nowbeld by IFC 4.8 0.8 5.6

Total undisbursed 1.1 0.1 1.2

1/ Extended in 1957 to the Belgian Trust Territory of Ruanda-Urundi for theimprovement of the Bujumbura-Muramvya road and the expansion of the lakeport of Bujumbura. The loan which was guaranteed by the Kingdom ofBelgium has been fully repaid.

2/ Prior to exchange adjustments.31 The IDA credit was complemented by an EEC Special Action Credit of

US$1.2 million.41 Including a NORAD Grant participation of US$5.8 million.5M Not yet effective.

- 29 -

Annex III(Page 1 of 2)

SUPPLEMENTARY PROJECT DATA SHEET

BURUNDI

POWER TRANSMISSION AND DISTRIBUTION PROJECT

Section I: Timetable of Key Events

(a) Identification : October 1982(b) Project Preparation July 1983(c) Appraisal Mission July 1984(d) Negotiations : MarchlApril 1985(e) Planned Date for

Credit Effectiveness: December 1985

Section II: Special Project Implementation Actions

- Engineering services to be provided for the preparation ofbid documents (para. 45)

- Management assistance team to assist in implementation ofaction program to strengthen Regideso's management andimprove its administrative and financial operations(para. 48).

Section III: Special Conditions

- investment program to be reviewed annually with theAssociation (para. 49)

- Regideso would not, without prior consultation of theAssociation, commit itself to any capital investment inexcess of UF$5 million and would ensure that everyinvestment in the electricity sector is economically andfinancially justified (para. 49)

- annual review of tariff levels (para. 57)

- reduction of arrears on receivables (para. 58)

- unless otherwise agreed with IDA, Regideso would not incurany new debt which would result in debt service coverageratio of less than 1.5 (para. 59)

- the Government would lend to Regideso funds necessary tomeet its share of the local construction costs (para. 54)

- 30 -

Annex III(Page 2 of 2)

recruitment of management assistance team (para. 48),consulting engineers (para. 47), trainers (para. 50), andan adviser for petroleum imports (para. 52)

Section IV: Special Conditions of Effectiveness

(a) agreement between the Association and Regideso on anaction plan to strengthen Regideso's management(para. 48); and

(b) agreement between the Association, the Government andRegideso on an action plan to reduce arrears (para. 58).

(e) Burundi to obtain from Rwanda and Zaire, the rightsnecessary for the construction, operation and mainteranceof the Transmission line (para. 43).

Section V: Special Conditions of Disbursement

- For the rehabilitation of the Bujumbura eubstation and theBujumbura-Ruzizi I transmission line: tne transfer ofadequate legal rights from SNEL to Regideso (para. 46)

- 31 -

Airmex I

Procurement Arag 8et /

Ba* uildelinesfor Other Disbursuet

Project Items b/ ICB Ibnultants LCB MethDds Total from IDACredit

1. llOkV trani ssion Line 5.7 (5.25) - - - 90% of toLal cost2. Bub=na substatimo 2.2 (2.0) - - - 90% of total cost3. Fzgineering Services - 1.2 (1.0) - - 100l of foreign currency cost4. Mnnlgem ssistanme - 1.5 (1.3) - - 100% of foreign currenqy ccst5. Studies - 0.25t0.2) - - 100% of foreign currency cost6. Trainirg 1.3 (1.3) - - 0.8 90% of total cost of

castruction anxl edpnt7. Cibitoke substatinn 1.1 (1.0) - - - 90% of total cost8. Distribution in 6

distris of Bujumbura - - - 4.99. 30 kV lines - i - 1.6

10. Distxibutimu inregioal towrs - - - 0.9

11. PetrolJe,n adviser - 0.15(0.1) - - 100% of foreigp carrency cost12. Rbllow up of disseination - 0.2(0.15) - - Z100 of foreign cirrency cost

Total 1D.3(9.55) 3.3(2.75) - 8.2 21.8

a/ FiYgres in parentheses are the annmits proposed to be financed by DMb Estimates of costs inclidirm cotingencies.

_ UlD uIl:IA

BURUNDIPOWER PROJECT

Bujumburo Arms to be Electrified RwVHydro Staison

V~Pragci AreasWIti/kUbanize Areas

Eaii.Iing Pawer Lines_ a70kV

lb ~ ~ ~ ~ ~ ~ - 35 kVFaw, , Li_es Unde Canstruc

C110 W

intenatl aund'ries ' / / K

I'~~~~~~~~FimRrz

~~~~n~~

7 ~ ~ ~ A~~

J,~~~~~~~~~~~~~~~~~iI /f//

3~~~

KLW.WiISS

WA'S.~~~~~~~~~~~~~~SITX

b__ _ _ _ _ _ _ _ _ _ _

I~~~~~~~~~~~~~~~~~~~~~~Itl

2r ~ ~ ~ , Hv//ISlot'I-rIsc,-..~~~~~~~~~~~16

IBRD 1851

BURUNDI 3%,UGANDA °t

POWER PROJECT I \ /-.00 ~ ~ ~ ~ ~ ~ ~ Z~>k'.~ K EN YAb N 1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~N

it.K

:r ~~~~~~~~~~~~~-5

40uw ~ w d B : f <'-D--

op-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~'h

,, g- .</ 7 3-.

kuao~~~~~~~~~~~~~~~~~a

BMW Usi-,, \ G niln e O 4 S O l W ; g < ; eUNDER

_C - Hydra PowePlsm

S Te theel B_r Plant& MetalI

( 0 0 ~~~~~~~~~Subsno;,ons

So0 kV Troa.s.aon L.nesk55lV 7o.an.n.mon Lines35

* \>>XiC ERSono J pr { _ _ _ft 30 3 V; 15 30 kV To.anasm,sn LinesR.-ga~~~~~~~~~~~~~~~~~~~~~~~~I 15 kV Tmansu,woan Line

Pr-w"rv Roads

\, \ Mobombc | / N Secondory Roads

_ Inrernot,onal Boondones

c- _ _ ~ j vzo | wvKILOMETERS 0 2i 5.0 75

MIIIES0 10 20 io ;° 50

30 31N

NOVEMBER 1984