WASHINGTON, January 10, 2024 – The World Bank will support the acquisition of fertilizers and pharmaceuticals through contingent financing aimed at tackling pressing shortages in the market, helping prevent individuals and households from sinking deeper into poverty in Burundi. Through the International Development Association (IDA), a $40 million grant will be provided to allow commercial Banks in Burundi to have access to an import backstopping facility.
The Access to Finance to Import Strategic Commodities (AFISC) Project will establish a foreign currency trade facility for Burundi’s commercial banks. It provides backstopping support on the payment obligations of local issuing banks to their correspondent banks, targeting the import of fertilizers and pharmaceuticals. At present, correspondent banks face considerable difficulty in providing letters of credit to banks in Burundi owing to the elevated risk associated with local banks. The proposed facility will therefore serve as an assurance to the correspondent banks that the World Bank undertakes to assume the payment obligations of the local issuing banks in the unlikely event that the latter fail to meet their payment obligations for the letters of credit for the import of fertilizers and medicines. For two years, the project will act as a short-term measure to revive the trade finance market to accompany the reform of currency liberalization.
“The AFISC Project aims to support economic recovery in Burundi with a specific focus on smallholder farmers and the private sector. The project complements the government-led macro-fiscal reforms under implementation and aims to restore the long-term functioning of markets,” says Hawa Cisse Wague, World Bank Country Manager for Burundi.
The project is expected to support Burundi's financial system through improved credibility and increased supply of trade finance at competitive costs. The beneficiaries will be Burundian commercial banks, as well as private importers and actors along the supply chain of pharmaceuticals and fertilizers. About 2 million smallholder farmers are expected to benefit from the fertilizers imported under the facility.
“We have embarked on far-reaching reforms under an Extended Credit Facility with the International Monetary Fund (IMF), and with the World Bank. We have recently implemented a foreign exchange liberalization reform and this project comes at the right time to revive confidence in the trade finance market and boost the capacity of Burundian banks to import critical and life-saving commodities,” says H.E. Audance Niyonzima, Minister of Finance and Economic Affairs of Burundi.
The project is designed as a contingent facility (deferred drawdown option) and will be implemented by the Banque de la Republique du Burundi.
* The World Bank’s International Development Association (IDA), established in 1960, helps the world’s poorest countries by providing grants and low to zero interest loans for projects and programs designed to stimulate economic growth, reduce poverty, and improve the lives of the poorest. IDA is one of the largest sources of assistance for the world’s 76 poorest countries, 39 of which are in Africa. Resources from IDA bring positive change to the 1.6 billion people who live in IDA countries. Since 1960, IDA has supported development activities in 113 countries. Annual commitments have averaged about $29 billion over the last three years, with about 70 percent going to Africa.