Burundi sector grant - PAAD (695-0125)

The program will encourage policy reforms aimed at removing barriers to entry into the formal sector, alleviating constraints to doing business, and facilitating international trade and export promotion. Dollar funds will be used by the GOB to pay foreign debts, especially U.S. debts. The GOB will provide an amount of local currency equal to the grant for use in A.I.D./GOB SME projects and for budget line items related to the private sector. Conditionality for FY 1990 includes: (1) establishment of customs clearance services at Kayanza, a major border town, so that merchants will no longer have to travel to Bujumbura for customs clearance; (2) decentralization of import and export licensing, by giving provincial banks and commercial banks in the interior of the country authority to issue licenses; (3) easing access to foreign exchange for business travelers; and (4) surveys of the informal and formal sectors and of domestic constraints to export expansion. Policy dialogue for FY"s 1991-95 will focus on: (1) establishment of customs clearance services at selected other locations; (2) simplification of clearance procedures at all customs posts; (3) simplification of business registration procedures; (4) increased availability of information on market prices; (5) establishment of legal protection for itinerant traders; (6) development of an export promotion plan; (7) reform of the Labor Code; and (8) establishment of a strategy to improve the flow of credit to SME"s. A companion project, 6950124, will finance TA, training, analyses, and commodities in support of the policy reform program. Amendment of 8/31/92 authorizes the release of the third-year (FY 1992) funding tranche, and defines expanded conditionality. The 1992 policy reform agenda targets liberalization in 6 areas: (1) the legal and regulatory environment vis-a-vis business enterprises and other private economic ventures, in particular, revision of the Commercial Code; (2) labor and employment; (3) international trade; (4) foreign trade and currency controls; (5) financial services; and (6) agriculture. Also included are covenants concerning the cooperation of participating GOB Ministries in monitoring and evaluating the program and its impacts, and the establishment of special bureaucratic mechanisms for reporting on the progress of reforms to USAID, including a special covenant requiring the Ministry of Finance to establish a mechanism for keeping USAID informed concerning progress under the Tax Code revision project. (PD-ABF-042)