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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of' The World Bank FOR OFFICIAL USE ONLY STAFF APPRAISAL REPORT REPUBLIC OF BURUNDI WATER SUPPLY SECTOR PROJECT MAY 31, 1991 Infrastructure Operations Division South-Central and Indian Ocean Department Africa Region aeport No BU Tllis document bas a restdctedisiribution ad may be used by recipients onisy la the performance of thelr offlîcia duties. Its contents may not otherwise be diselosed without Worl lbank authmizaton.

2 CURRENCY EOUIVALENT Currency Unit = Burundi Franc (FBu) US$ 1. = FBu 16 (as of January 1991) WEIGHTS AND MEASUIRES Metric British/US Eguivalents 1 meter (m) = 3.3 feet 1 hectare (ha) acres 1 kilomneter (km) =.62 rnile 1 square kilometer (km2) =.39 square mile (sq.m.) 1 kilogram (kg) = 2.2 pounds (lb.) 1 liter (1) =.26 US gallon (gai.) 1 metric ton (m ton) -2,24 lb. GLOSSARY OF ABBREVIATIONS ANI) ACRONYMS AGCD - Administration Générale pour la Coopération et le Développement (Belgium Cooperation) AfDB - African Development Bank BRB - Banque de la République du Burundi CCCE - Caisse Centrale de Coopération Economique COOPECs - Coopératives d'epargne et de Crédit CURDES - Centre Universitaire de Recherche sur le Développement Economnique et Social DGHER - Direction Générale de l'hydraulique et des Energies Rurales DHA - Direction de l'hydraulique et de l'assainissement DIEPA - Décennie Internationale de l'eau Potable et de l'assainissement EDF - European Development Fund GTZ - Deutsche Gesellschaft flr Technische Zusammenarbeit KfW - Kreditanstalt fûr Wiederaufbau lcd - Liter per capita per day MEM - Ministry of Energy and Mines MDR - Ministry of Rural Development NGO - Non-governmental Organization PAEMR - Projet d'adduction d'eau en Milieu Rural PEA - Projet Eau et Assainissement PEP - Public Expenditure Program REGIDESO - National Water and Electricity Authority SETEMU - Services Techniques Municipaux UNICEF - United Nations Children's Fund WHO - World Health Organization GOVERNMENT OF BURUNDl FISCAL YEAR January l to December 31

3 REPUBLIC OFBURUNDI WATER SUPKPLY SECTO! RQJIE FOR OFFICIAL USE ONLY STAFF APPRAISAL RtEP-ORT Table of Contents Pae No. CREDIT AND PROJECT SUMMARY... (iv) 1. THE WATER SUPPLY AND SANITATION SECTOR A. Geographic and Economic Setting I Population... Econonic Situation... 1 Local Organization... 2 B. The Water Supply and Sanitation Sector... Water Resources... Sector Organization... 2 Levels of Services... 3 C. Previous Bank Involvement... 4 Hl. THE WATER SUPPLY SECTOR POLICY Sector Objectives... Cost Recovery... Responsibilities between Urban and Rural Subsos secos... 6 Institutional Arrangements for the Rund Sub sector... 7 Sector Development Program... Sector Corstraints... 8 Rationale for Bank Participation... 9 DII. THE PRO.lECT Genesis... 1 Project Objectives... 1 Project Description... 1 Proje-t Cost Project Financing Plan Implementation Training and Sensitization Procurement Disbursement This report is based on the findings of a Bank appraisal ws-asion which visited Burundi in October 199. The mission comprised Messrs. J.F.Dreau (municipal engineer, mission leader), R.Senou (financial analyst), A.Wildt (sanitary engineer) and G.Tenaille (consultant). Messr S. Calegari (Sr. sanitary engineer) was the lead adviser for this operation. Mrs. A. Paz assisted in the preparation of the repoit. Messrs. M. Blanc snd F. Aguirre-Sacasa are the managing division chief and the department director respectively for the operation. This document has a restricted distribution and may be uscd by recipients only in tbh performance of their cmcial duties. Its contents may not otherwise be disclosed without Worid Ba.ak authorization.

4 Page No. IV. THE IMPLEMENTIeG AGENCY DGHER Organization and Management Staffing and Personnel Accounting and Auditing V. FINANCIAL ANALYSIS A. Rural Sub sector... 2 Introduction... 2 Demand Projections... 2 Operation and Maintenance, Renewal Costs... 2 Water revenues, Water Tariff and Annual Fee... 2 Affordability B. Urban Sub sector - REGIDESO Past Financial Performance Improvements of Present Situation Financial Restructuring Arrears and Collection Water Tariffs Performance Contract Projected Financial Position VI. ECONOMIC AND SOCIAL ANALYSIS Project Benefits Project Justification Least Cost Solution Environmental Impact Women's Role Impact on Poverty Group Project Risks VII. AGREEMENTS REACHED AND RECOMMENDATIONS Agreements reached at Negotiations Conditions of Credit Effectiveness Conditions of Disbursement Recommendations... 27

5 - iii - LIST F 1. Sector Policy Letter Africa Region - Water Supply and Sanitntion Indicators Data on wvater-bome diseases Present situation of the rural water supply sub setor Detailed Project Description Implementation schedule Detailed Cost Estimates by year, component and type of expendites Characteristics of the systems Projected tariff and annual fee level Comnunal Water Utilities - Income statoments Il. REGIDESO - Financial projections Organization chart of DGHER Estimated schedule of dishursements Termis of reference Job descriptions Supervision plan Progress reporting requiremets Selected documents and data available in Project file... 7 LMT E TABLES 2.1 Proposed coverage of water and sanition servics Rural water systems included in the project Project cost summary by component Project cost summary by type of expenditures Project financing plan Procurement arrangements Disbursements under IDA credit LM OFMA IBRT) No IBRD No 2388 Water Supply Sector Project. Riparianh concerned with the Project

6 - iv - BURUNDI WATER SPPILY SECTOR QB1RQIE Credit and Project Summuary Borrower: Beneficiaries: Amount: Terms: Cograncing: Republic of Burundi Ministry of Rural Development (MDR) and Ministry of Energy and Mines (MEM) SDR 24.2 million (US$32.7 million) Standard IDA Belgium and Gernany (AGCD, KfW) Proiect objectives: The nain objectives of the project would be to: (a) mprove the quality and quantity of potable water provided to the rual population; (b) increase the local population's sense of responsibility fur maintaining its water supply facilities; (c) help the government and REGIDESO, the urban utility company, develop and implement appropriate institutional and financial arrangements in water supply sector; (d) extend the pricing policy initiated under the rural water supply project to the entire country; (e) coordinate donor activity in the rural water supply sector; and (f) help the government prepare and monitor a public expenditure program (PEP) for the sector. Proiect Descrintion: The project would include the following components: (a) construction of rural water supply systems in 9 provinces split in two stages: stage 1 - provinces of Kayanza, Ngozi, Karuzi and Muyinga; stage 2 - provinces of Gitega, Muramvya, Cibitoke, Bubanza, Makamba; (b) development and protection of about 3, springs; and (c) capacity building in the Department or Rural Water Resources and Electrification (DC-l! ER), within the MRD, through the provision of expertise, equipment and training, in the conmnunes and,. communal water utilities tbrough the provision of training and sensitization of population, and in REGIDESO through the provision of studies. Proiect Benefits: Tbe proposed project would improve public heulth tbrough provision of safe water supply in rural areas. Another important benefit would be decentralization and development of communal responsibilities for infrastructures which directly serve tie population. Institutional strengthiening and cost recovery would provide the basis for future expansion of raml water supply systems and would improve the financial situation of REGIOESO. Though experience under the second project demonsates that even the poorest communes are ready to pay for wator, there is the risk that cost recovery and beneficiary participation in the maintenar"e of facilities

7 ioect Cost: would be less than expected. This risk will b. moimized by the planned campaigpb for sensitizing population on benofits provided by the use of safe drinking water. The total cost of the project is estimat.d at USS 54.7 hiilion equivalent, with foreign costs of about US$ 38.2 million which represent 7 percent. The detailed cost estimates is sbown in table below. Project Cs Eimates (US$ million) Local Foreign Total Foreign as X of iotat A. Rurat _.ter smipty syste Provinces of: (1) Ngozi and Nuyirga % (2) Karuzi end Kayanza X (3) Citega and Murawya % <4) Cibitoke, Bubanz and lakanba % 8. Springs % C. Institution buitdhng Cl) Project Unit (PAER) % <2) OGHER % (3) Conal Water Utilitii-,.2..2.% (4) REGIDESO atudies % Refinoe,ino of PPf X Totat Base Costa Physical Contingencies X Frice Contingencies % TOTAL Prices as of June 199. Base costs lnclude taxes on locally procured goods estimated at USS.2 million equivalent. Financin -Plan: Financing Plan (US$ million) Local Foreign Totat Percent of Total IDA Credit KffW Grant AGCD Grant Sub total Goverrunent and Caes TOTAL

8 *^~~~~~ r~~~~~~b - gsi.. N WW - ; - w. w N-ii *

9 BURUNDI WAT*ER ST!PPY SECTOR PROJECT 1. THE WATER SUPPLY AND SANITATION SECTOR A. Geographic and Economic Setting 1.1 Burundi is a small landlocked country on Lake Tanganyika situated in Eastem Africa between Rwanda, Zaire and Tanzania, about 1,4 km from the Indian Ocean. The country covers 27,835 knm, including the 2,8 knm2 that make up its share of Lake Tanganyika. There are three principal geographic zones: (a) the Imbo coastal plain along the eastern shore of Lake Tanganyika and the Ruzizi River Valley north of the lake, where the climate is tropical with an altitude of 8 m; (b) the high, cool, central plateau region that contains the Zaire-Nile divide, between 15 and 2 m, where most of the population lives; and (c) the North-eastern and South-eastem (Mosso Plain) lowlands extending from the central plateau to the Rwandan and Tanzanian borders. Average temperature varies from 15 to 25 degrees C throughout the year. Population 1.2 With a population of about 5.25 million growing at the high rate of 3 percent a year, Burundi is the second most densely populaied country in Africa (21 inhabitants per square km of land). Life expectancy is 48 years, and child mortality rate is i 19 per thousand. About 93 percent of the population lives in rural areas as small farmers who depend mainly on subsistence agriculture and on one main cash crop, coffee, which provides the najor source of the country foreign exchange. Bujumbura, with a population of about 25,, is the only city in Burundi. Ecornomie Situation 1.3 GDP per capita, estimated at about US$23 (1989), ranks among the lowest of the continent. GDP growth has averaged 6.2 percent in real terms from 1985 to 1987, but was 5.2 percent in 1988 and only 1.5 percent in The country has limited natural resources other than a relatively fertile agricultural land. Agriculture is the predominant activity, contributing more than half of GDP, 93 percent of employment and 88 percent of export earnings. Bumndi is one of the few African countries that are self-sufficient in food. The most important export crop is coffee, which accounts for about 8 percent of export earnings. The secondary sector is small, accounting for about 14 percent of GDP and 8 percent of exports. 1.4 After a period of relatively good growth, partly due to the coffee boom in the mid-197s and increased foreign aid, Burundi faced serious economic and financial difficulties in the early 198s. With the decline in coffee prices and a rise in oil prices, the terns of trade deteriorated by 45 percent between 1978 and 1981, weakening the balance of payments and generating large budget deficits. The government imposed import restrictions and tightened foreign exchange and price controls to hold down the increasing deficit in the balance of payments. Th. resulting economic slowdown highlighted Burundi's major structural constraints: its dependence on coffee revenues, weak >rivate sector and lack of incentives for a sustained growth of agriculture and industry. 1.5 In 1986, the government undertook a major adjustment program under the first SAL, with the objectives of restoring financial stability and initiating structural changes to increase reliance on market forces. The new government that took office in September 1987 has committed itself to pursue and strengthen the adjustment program under SAL 11, which became effective in November It has and will continue to address structural issues by: (i) improving macro economic management, (ii) stimulating exports, (iii) promoting private sector development, (iv) reforming the public enterprise sector, and (v) improving public expetiditure management. In addition new measures are aimed at: increasing the efficiency of the financial sector, liberalizing the labor market and alleviating poverty.

10 Under th. first phase of the ajusmet progrm, the govemneat implem.ntcd a strict budgetary policy including a serong reduction of public exponditures. Public investmet was reduced to conform to the new tight macroeconomic and financial policy. A throyear rolling public expenditurs program (PEP) is now being prepared to 'erve as the basis for a unified systuen of bdget preparation. This PEP in expected to lead to more efficient resource maocation and give priority to the mainenance of inftucture rather than to new capital expenditures. &a]omanizado 1.7 In 1982 the number of provinces was increas d ftom 8 to 15, and the number of districts, or *communes from 79 to 114 1/. Tho communes are dministralively divided irto 2,466 'hills', The cemamune is headed by a communal administrator. He is appointed by the Ministry of the Interior und reports to the govemor of the province. Each cont-june has an accountant and many of them have a water service attendant who is responsible for existing wate" supply systems. Most provmces have a smal urban center providing servie3 to surrounding nral ancas ZI. 1.8 A reorganization of local finaucing was undertaken in January 1984, principally to increase local involvement and responsibility. New taxes were established, to be collected by the communes. However the commnunes remain financially weak, with revenue averaging FBu 15 per capita in Tbe second urban development project (Cr.No 1968-BU) initiated a study of communal resources with the objective of strengthening the financial viability of the communes, urban as well as rural. B. The Water Supply ad Sanitation Sector Water Resouroes 1.9 Burundi has good rainfall, with 8 Co 2, mm a year in two rainy sessons. Rainfall varies from less dman 9 mm in the Imbo Plain, to 9-1,2 mm in the eastern plains, about 1,2 m in the central plateau and 1,6-2, mm along the Zuie-Nile crest. lierefore, it has ad',quate water potential for community water supplies. Because of its geology und climate, there are many springs and surface waters, principally in the central plateau. In the Ruzizi valley and the eastern lowlands, groundwater is the only source available. However, the quality of the water provided by many prings, which are not protected, as v._ as by the streams and marshlands is doubtful or poor. The incidence of water-borne diseases is high and accounts for more than 7 percent of all endemic diseases (see Annex 3). Sector Ormnizaion 1.1 A National Commission for Water (Commission Nationale Permanente des Eaux) was established on March 15, 1976 under the chairmanship of the minister of agriculture. When the Ministry of Energy and Mines (MEM) was created in October 1987, with responsibility for water, a new National Commission for Water and Energy was established Ji. This commission is chaired by the minister of energy and mines. Th. main objectives of this commission are to coordinate the development of the water and energy sectors, define the responsibilities of the agencies involved and protect waler and energy resources. This commission reports to the prime minister and minister of planning. 1J Decree-Law No. 1/29, September 24, / By Decree No. 1/'3, March 11, 1986, the govemment classified 23 towns as urban centers, in addition to th. capita city, Bujumbura. Ib list includes the chief towns of the 15 provinces, plus Rumonge, Nyanza-Lac, Rugonibo, Matana, Bubiga, Ijenda, Mutabo, Bulcirazi and Mwaro. I/ Decree No.1/126, December 11, 1989.

11 Water supply in urban centors 8 naed by REGIDESO, a govemnment-owned company that is also responsible for elerti power in the country. REGIDIESO was establisehod ifn 1968, under the supervision of the Ministry of Energy and Mines 4I. It lb supported by soveval donots: the African Development Bank (AfDB), Gernan Cooperation (KfW and GTZ), the French Caisse Centrale de Cooperation Econonique* (CCCE), and IDA. Originally REGIDESO had responsibility for water supply tbzoughout the country, in rual as well as in urban arens In Febnuy 1979, resp asibility for water supply in rual area was trmsferred to the Department of Rural Water Resources and Blectrificatlon (DHER) Il witbin the Ministry of Rural Development (MDR). The department was in charge of the planning, design, constrction (mainly by forme account), operation and maintenance (O.& M.) of all mral electricity mnd water 'upply schemnes. However because of a shortage of funds and technical staff and a lack of proper ins ional arrangements most of the rutal water supply systems were not masntained. By 1984, about a third of exisung rurl water systems were out of service. Under the rural water supply project (Credit 1625-DU), the govemmont d.cided to give Wo local communities under the authority of the conmnunes, thi responsibility for opetation and maintenance of water supply systems and introduce cost recovery measures. In 1988, the Department of Rural Water Resources and Electrification was upgraded into the General Directorate for Rural Water and Energy (DGHER), with two departments, one for energy, and one for water (Département de l'hydraulique et de l'assainissement, DHA) f/ Until 1983, sanitation in Bujumbura was handled, by REGIDESO. In May 1983, ihe goverament transferred this responsibility to a new agency, SETEMU (Services Techniques Municipaux), with the objective of extending its activities to all urban centers. li 1989 as a condition of the second urban development project, SETEMU became an autonomous agency under the responsibility of the Bujumbura Municipality. Sanitation in rural areas is hasdled by DHA. Levels of Service 1.14 Cormpared with other Sub Saharau African countries, the levels of service are slightly higher than the average for water supply, particularly in-the urban areas, sad radier lower than average for sanitation for both urban and rura ames (see annex 2) 1.15 Water Su_ply. REGIDESO operates 28 water systems (778.5 krm. of pipes), with 354 standpipes and about 12,35 house connections. Water is supplied to about 92 percent of the urban population, 25 percent through private connections and 67 percent dirough standpipes Buijumbura receives about 5, m3 a day, 7 percent from Lake Tanganyika, 19 prercen t from the Ntahangwa River, and 7 percent from three springs located in the hills above the city. T'e city hvl about 9,8 pn-:.aite connections (17 percent of the population) and 21 standpipes, of which only 12 are workir,g. This results from REGIDESO systematically cutting off water in standpipes which have not been maintained rather than maintaining them, because standpipes water bills are not paid by the municipality. 'Me municipality and REGIDESO have recently agreed to request from standpipes users the payment of an annual fee which would enable the muuicipality to clear up the situation, Instructions for standpipes management and payment of water by users in centers operatad by REGIDESO, are under preparation and would be sent to local authorities by June 1991 (para.7.1 (a». This issue ie also being addressed under the second urban project (credit 1968-BU) by strengthening municipal revenues and therefore the ability of the municipality to pay its water bills. I/ Decree-Law No. 1/196, October 2, / Ebliued by Decree No. 1/18, February 2, f/ Decree No. 1/29, December 22, 1988.

12 The level of service in rural areas increased from 22 percent in 1982 to 48 percent by the end of 199. Coverage varies from 25 perçent of the population in Muyinga province, up to 81 percent in Ruyigi provizace. About 17 percent of the rural population is served through piped systems (16.5 percent through standpipes and.5 percent through house connections), 31 percent through developed springs, and.3 percent through wells liiere are 338 rural water supply systems with 2,343 kn of pipes, of which 23 with pumping stanon, equipped with 2,765 standpipes, and about 2, house connections. Each standpipe serves about 22 inhabitante. There are about 1i1, developed springs. Prom 1979 to 1989 UNICEF developed 7,625 springs. In addition, 96 springs were developed under the supervision of the NGO Action Aid, and 2,39 by other projects. Each spring serves 132 people on average and sometimes supplies schools und dispensaries. Annex 4 shows the level of service for each province. Rural residents without service rely on undeveloped springs and polluted streatns or ponds, which are generally located at sonie distance from their home Per capita consumption is low at about 8 liters per day (led) compared to 3 lcd recommended by the World Health Organization (WHO). The standard consumption used for new projects is 2 led for standpipes and 1 Icd for house connections. 1.2 Sanitation. In Bujumbura about 11 percent of the population is served by three sewerage systems, covering the city center, Ngagara and Mutanga. Sewage is discharged into the Ntahangwa River or directly into Lalce Tanganyika without treatment. The Mutanga system is equipped with a treatment plant, but it does not work. About 9 percent of the population is served through septic tanks and 8 percent through pit latrines, often used by several farnilies A study financed by AfDB was carried out from 1982 to 1986 to prepare a sanitation project for Bujumbura. The total cost of this proposed sanitation project would be about US$3 million. AfDB, Kreditanstalt fuer Wiederaufbau (KfW) are interested in financing the project, but no formal decision has yet been takea, in view of the uncertainty about the origin of future resources required to cover operating and maintenance costs The secondary towns have no sewerage system; they rely on septic tanks (2 percent) and pit latrines (8 percent) Ln rumral areas 3 percent of the rugos' (family farnis) have a traditional pit latrine that does not moet minimum sanitary conditions. The rest of the rural population lacks formal waste disposal facilities. Several public and private improved pit latrine systems have been tested, but proved too costly to install. Although residents could build the latrines, they have to buy the concrete floor, which costs about FBu 2,. The present policy is to give priority to equipment for schools and dispensaries. About 2 schools (17 percent) have been provided with good sanitary facilities, 15 of which were financed under the IDA supported education sector development project. C. Previous Bank Involvelment 1.24 In 1966 the Bank financed a water supply project for Bujumbura (Cr. 85-BU). REGIDESO was created under this project, which was completed in A project performance audit report (PPAR No 792) was prepared in June A second project was approved in 1986 (Cr BU) to improve water supply facilities in rural areas. The credit will be closed in December This project included the following components: (a) rehabilitation and extension of 33 rural water supply systems; (b) strengthening the DHER snd improving its effectiveness through the provision of technical aseistance and equipment; (c) training for DHER's staff, communal administrators, accountants, and water supply attendants; and (d) feasibility studies for rural water supplies in the provinces of Ngozi, Kayanza, Kanzi snd Muyinga (to be developed under the proposed project). The project was designed to support the transfer of responsibility from DGHER to communes for the O.& M. of water systems and introduce a cost recovery mechanism.

13 Due to an efficient project unit, the project was implemented on time and civil works were completed in Aigust 199, despite a delay, due to a government decision in 1988 that water charges necessary to cover O.& M. expenditures would not be paid by stanpipes usera, but rather by the communes. However this decision could not be implemented for lack of resources and the govemment eventually agreed to implement the original cost recovery policy gradually. In 1989 a test was under'aken in 3 communes in which revenue collection rmie ranged from 4 to 85 percent. In mid 199, the cost recovery policy was extended to 26 communes where the systems were operational. For the first year of implementation of the policy, the results are -elatively good and encouraging, with an average coverage of 35 percent and one fifth of communes over 6 percent. The design of the proposed project is based on results and lessons learnt through this ongoing project, namely for decentralization of responsibilities, organization of the local level, cost recovery policy and implementation arrangements li 1985 IDA provided funds to expand the power transmission and distribution system of REGIDESO (Cr BU). Besides electricity physical components the p:..ct included the construction of a training center to improve performance of REGIDESO' staff. Construction of this training center is completed In April 1991 the Energy Sector Rehabilitation Project was approved. This project has been designed to strengthen the institutional capacity of DGHER and REGIDESO in the power sector.

14 - 6 - lta, WATER SUPmY SECTOIR OLICY 2.1 A draft letr of sectoral policy was prepared by the govermment and discussed with the appraisal mission (see annex 1). This draft was reviewed by the national commission for water, sent to the Bank before negotiations and was discussed during negotiations. The letter was signed as a condition of Board presentation of the proposed creit. The proposals included in tbis letter provide a sound basis for the development of the sector. SjççtQr Obied&ËM 2.2 In January 1982 at the first national workshop in the framework of the water supply and sanitation decade, targets and associated investment costs were set as follows: Table Z.1 Proposed coverage of water and sanitation services Investment a/.water 9% 95% 98% US$65 million.sanitation 4% 65% 8% US$53 million Rul At.Mater 22% 4% 5% US$21 million.sanitation 3% 6% 85% US$2 million a/ in 1981 prices. 2.3 The objectives for sanitation are far from being met as domestic and foreign resources were not sufficient, and because cost recovery measures were not implemented. For water supply the level of service could reach 5 percent by 1992 in nral areas, and 94 percent (instead of 98 percent) in urban areas. 2.4 In 1988 the govemment set revised water sector objectives calling for universal access to potable water by 2. A level of service of 98 perent in urban centers and 75 percent in rual areas, at a cost of US$8 million, would be & reasonable objective, considering the availability of foreign and local fund's, and the absorptive capacity of the executing agencies. For urban centers, this objective has been accepted by the govenmment which has also agreed to deliver the service to the rural sector to the extend allowed by local water resourtes availability and topographical conditions. These objectives, expressed in the sector policy letter, are consistent with the development program detailed below (aa 2.14, 2.15 and 2.17). mhe government has also agreed to 7 percent coverage by sanitation services in Bujumbura and 6% in secondary centers and in urban areas. Cost Rewcvr 2.5 lhe letter of sectomal policy specifies that the cost of water supply and sanitation services would be fuuy recovered in urban centers. Tariffs would be reviewed annually to cover actual cost of service. The objective would be to reach the long-term marginal cost. In rural areas the government would finance construction cost (including related debt service) and beneficiaries would cover O.& M. and renewal costs. This cost recovery policy would be reviewed in the medium term, as the economic situation of the rural population is expected to improve. Remksbilities between Urban and Rural Sub sectors 2.6 When DHER was established in 1979, the respective responsibilities of REGIDESO and DGHER were not clearly defined, particularly in the rural areas surrounding the centers operated by REGIDESO. This was corrected in 1986 when REGIDESO's statute was amended limiting its responsibility to Bujumbura and 23 urban

15 -7 - centers?/. A 1987 study covering the financial and institutional aspects of water supply mn- sanitatt endorsed limiting REGIDESO's responsibility to these 23 urban centers I/. Although the findings were approved by the steering committee, no change has occurred and despite this clarification REGIDESO continues to operate 28 centers and is implementing a rural water supply project, financed by KfW, for 5 new centers. Contrary te govermment policy REGIDESO's standpipe users do not pay for water; the commune is billed. This would be corrected under the proposed projecv, and the transfer from REGIDESO to the communes of water systems concerned would be completed prior to any disbursement for pipes acquisition for the provinces of Karuzi and Kayanza (para.7.3). 2.7 If technical support from REGIDESO is necessary to assure adequate O.& M. of rural systems to be transferred, the communes could contract with REGIDESO for the services required. The communes would pay REGIDESO, and would be responsible for collecting service charges from the users. The communes would also be free to contract with a private company for the same services. Institutional Arrangements for the Rural Sub sector 2.8 On August 16, 199 the Council of Ministers agreed on the organization of the rural water supply sub sector and asked the Ministry of Interior and MDR to prepare instructions, to be sent to all province goiernors and communal ad ministrators. This statement based on the experience of the ongoing project, transfers responsibilities to the local level and is in line with the sector policy letter and has been sent to local authorities in December 199. During negotiations, assurance was obtained that it would be formdalized in December 1993, taking into account the experience gained after three years of implementation (para.7.1 (b)). 2.9 Thi communes are responsible for potable water supply and own all water facilities, except those operated by REGIDESO. After the construction of a new system, the facilities are handed over to the communes, which are responsible for O.& M. and renewal of the facilities thereafrer. 2.1 The O.& M. of all water systems in the commune, piped systems as well as springs or wells, would be the responsibility of a communal water utility ('régie communale de l'eau"). During negotiations, assurance was ootained that the utility would be established before starting works in the concemed commune (para.7.1 (c». T'e utility would be managed by a communal water board, established in the following manner (a) (b) (d) The consumers of a water point, standpipe, spring, or well would elect a person who would be in charge of the care and maintenance of the facility; The group of persons so selected would elect representatives to serve on the commune users committee; The users committee would meet annually -or as appropriate- to elect a communal water board, composed of ten to twelve representatives, including its chairman and its treasurer The water board would have full responsibility for O.& M. of all the water facilities in the commune. The board would present the budget at the annual moeting, outlining expenditures for an adequate O.& M. and construction. The board would also set the annual user charges. These decisions would be approved by the communal administrator. If the water board did not fulfill its stated functions, the communal administrator would take the initiative for the management of the systems At each water point, an elected agent would collect the fees, delivering them to threasurer of the water board, who would deposit the funds on a bank accouat (or other financial institution) opened in the name of the communal water utility. 'Me chairman and the treasurer would have joint responsibility for this account. 'Me water board would pay the salaries of the water attendants and other staff and would finance all O.& M. costs and 2/ Decree No. 1/12, March 11, ji This study financed by AfDB, was carried rut with REGIDESO as executing agency. A steering committee proposed by IDA and in which DHER and other concemed agencies were represented was established.

16 replacement of assets. The water board would receive the assistance from the commune as required. In particular, the communal accountant would be responsible for the accounts of the utility, which would be reviewed every year by the provincial inspector of the Department of Inspection for Communal Projects of the Ministry of the Interior Where rural water systems served more than one commune, the water boards of the compiunes involved would form an intercommunai water authority. This body, composed of ten to twolve elocted representatives would operate all fixed assets that served the communes involved. The authority would charge a uniform tariff; the communal water boards would pay the bills and recover the cost from the users of these intercommunal systetns. Sector Development frongam 2.14 Since 1985, the rural water supply sector has been developing rapidty. Many projects are under way and studies are being carried out for future projects under the auspices of IDA, UNICEF, European Development Fund (EDF), KfW and Belgian Cooperation (AGCD). The project financed by IDA, KfW and AGCD would cover 1 provinces: Kayanza, Karuzi, Gitega, and Muramvya for IDA; Ngozi, Muyinga, Ruyigi, Bujumbura and Bururi for KfW; Cibitoke, Bubanza, and Makamba for AGCD. The EDF has initiated projects in the provinces of Cankuzo Rutana and Kirundu, plus the Mugamba Project covering partially the provinces of Bururi, Bujumbum, Muramvya, and Kayanza. This program would cover the whole country for a total investment cost of about US$73 million The Water and Sanitation Project (PEA) financed by UNICEF includes the development and protection of 6,4 springs by 1992, the construction of 71 km of piped systems and 5,65 pit-latrines, and the training of 3 commnunal water attendants. In addition, many NGOs such as Association Française des Volontaires du Progrès and Action Aid, contribute to the sector development All donors involved in the rural water sub sector have agreed to promote decentralization of responsibilities at local level and cost recovery, as specified in the letter of sectoral policy. After completion of ail these projects the service level in rural areas would rise from 48 percent at the end of 199 to about 7 percent in / 2.17 'Me urban water supply sector would be developped under KfW and CCCE financed projects in Bujumbura and in ten secondary centers (Kirundo, Muyinga, Rumonge, Rulyigi, Karuzi, Buhiga, Mabanda, Burui, Cibitoke and Makamba) During project implementation the government would submit updated three-year expenditure and investment programs by October 31 annually to IDA (para.7.1 (e». The government would ensure that investments in the water supply and sanitation sector are technically, financially and economically justified. IDA would also review and romment on DGHER's annual budgets (para.7.1 (e)). Sector Constraints 2.19 The primary constraint is the capacity and willingness of the beneficiaries to pay for potable water. This is likely to be a continuing problem since water charges will rise as more sophisticated an costly systems wilu be installed, with pumping stations and treatment plants. 2.2 Another constraint is the weak formal coordination between the various donors and projects. No formal meeting has been held in Burundi since the 'Décennie Internationale de l'eau Potable et de l'assainissement^ (DIEPA) workshop in January To strengthen coordination in the sector the govermment would send its sectoral policy letter to au donors concerned with the sector and would convene an annual meting of their representatives to review progress in implementing sector policy and investments. 2/ TIi rural population in 1989 was 4.9 million. By 1997 the rural population would rise 'o 5.8 million.

17 -9- Rationale for Bank Participation 2.21 Access to safe water supply has been, within the DIEPA, accorded a high priority by the govemnent and the actual policy is to develop the necessary social infrastructure which should directly benefit the population, by providing an equitable access to basic goods and services such as health, transportation and safe water supply The Bank involvement in the water sector is consistent with the govemment's main objectives namely (a) to increase the level and quality of water supply services; (b) to supply low-income neighborhoods; (c) to provide continued support for increasirg planning, design and implementation capabilities of the institutions involved and (d) to achieve adequate cost removery in urban and rural water supply sub-sectors The Bank's objective in the rural water supply sub-sector is to support the government's policy to: (a) give communes full responsibility for water supply in rural areas sad (b) establish a system of charges to be collected from the beneficiaries to cover O.& M. and renewal costs. This policy, designed during the preparation of the rural water supply project (Cr BU), was initiated in 26 communes in 199. After extensive consultation with other donors, this policy was endorsed by KfW, AGCD, EDF and UINICEF. The proposed project provides a good opportunity to implement this new policy throughout the country. IDA's leadership ensures that adequate attention will be paid to institutional and cost recovery aspects of the sector The Bank's objective in the urban water supply sub-sector is to help the government improve cost recovery mechanisnis and clarify the responsibilities between REGIDESO and DGHER. 'fe proposed project will facilitate the dialogue between the institutions involved.

18 - 1- m. lm PRRECT Genesis 3.1 Under the rural water supply project (Credit 1625-BU), feasibility studies wre carried out for new rural water supply schemes in four provinces: Ngozi, Muyinga, Kayanza and Karuzi. TIe studies were completed in July After review, MDR decided to retain 43 gravity systems, 9 in Ngozi province, 5 in Muyinga province, 18 in Kayanza province and 11 in Karuzi province. Tie Bank agreed to finauce the final design studies for these systems. The contract was awarded in March 199 and the studies began in May In July 1989, MDR requested KfW to finance the works for these four provinces. Following an appraisal mission in October 1989, KfW agreed to finance the works for the 14 systems in Ngozi and Muyinga provinces and to apply the institutional and financial arrangements spelled out in the sector policy letter. nie KfW grant was approved in July 199 and the bidding process is scheduled to start during the second semester of During a preparation mission in November 1989, meetings were held in Bujumbura with the Belgian Cooperation (AGCD), which agreed to cofinance the proposed project for the provinces of Cibitoke, Bubanza and Makamba. A Belgian Franc 39 million (US$1.3 million) special agreement was signed by the Belgian and tie Burundian Governrnents to finance the studies in these 3 provinces. At the same time the government requested the Bank to finance studies in two other provinces, Gitega and Muramvya. 3.4 During tie appraisal mission, meetings were held with the UNICEF's PEA project, and with NGOs. Participants agreed to cooperate on the development and protection of about 3, springs in the provinces covered by the project. Proect Obiectives 3.5 The objectives of the project are: (a) To improve the living conditions of the population by increasing the quantity snd quality of potable water; (b) To implement the policy of payment for water, in urban snd in rural areas; (c) To enhance responsibility of local govenments for maintaining water supply facilities; (d) To strengthen the institutions involved in water supply; and (e) To help the govermment develop and implement appropriate institutional arrangements in water supply sector. 3.6 These objectives are consistent with the decentralization policy of the goverument, and are supported by the Bank. In particular, the Bank is financing under the second urban development project a study aiming at improving financial as well as human resources of the communes. 3.7 A mid-term review by govermment and IDA will serve to follow progress, make corrections during implementation as needed and draw lessons on replicability and sustainability (para.7.1 (f). During this mid-term review special attention would be given to the findings of the reorganization study of DGHER (para.3.8 C.(a)) and a relevant action plan would be proposed. Proiect DescriDtion 3.8 The proposed project (for a detailed description see annex 5) would include the following components: A. Water supply systens Construction of new rural water supply systems m nine provinces: this component is split in two stages, according to the status of the studies:

19 - il - (a) First stge: In the provinces of Kayanza an Kamuzi (IDA financing ) and Ngozi and Muyinga (KtW financing), 43 systems have been retained and are listed below. (1) KAYANZA PROVINCE: Table 3.1 Rural water supply systems induded in the project 1. Bwisange 6. Mbogw. 11. Kabarore 16. Gatara Sud 2. Gitwe 7. Muhanga 12. Ceaipzi 17. Buteganzua 3. Gasare 8. Rubangu 13. Ruvoo 18. Rublrizi 4. Munanira 9. Rango 14. Mikoni 5. Remer, 1. Rugazi 15. Catara N (2) KARUZI PROVINCE: 19. Kiyange 22. Canziktro 25. Bibara 28. Taba 2. Gaharo 23. Ruzamaza 26. Casera 29. Gtanga 21. Bukenyusi 24. Muogo 27. Rugwisa (3) NGOZI PROVINCE: 3. Bomba 33. Cugumile 36. Nivo 31. Buhanda 34. Cikomero 37. KIbuye 32. Cahi 35. Kibuye 38. Ruhororo (46 MUYINGA PROVINCE: 39. Gashoho 41. Klyanza 43. Nkoyoyo 4. Karam 42. Mugano (b) Second stage: In the 5 other provinces, Gitega and Muramvya (IDA financing), and Cibitoke, Bubanza and Makamba (AGCD financing), provision for feasibility study, fiaal design and construction of selected systems. B. Development of springs Catchment and development of about 3, springs in the provinces covered by the project; C. Istitution building (a) strengthening DGHER and DHA providing technical assistance, equipment and training, and financing an organization study of DGHER; (b) assistance to the Project Unit (PAEMR) through the provision of technical assistance, equipment and training; (c) training of communal wster board staff, chairm and treusurer and water supply attendants; (d) consulting services for construction superision, the audit of DOHER and PAEMR's accoumts, and feasibility and final design studies; and (e) Updating of the urban water tariff, and master plan for water supply in Bujumbuma.

20 Pe t Cost 3.9 The total cost of the project is estimated at FBu 9.2 billion (US$54.7 million), of which US$38.3 million, or approximately 7 percent, represents the foreign exchange component. Base cost estimates are in prices as of June 199. This cost includes refinancing of the IDA Project Preparation Facility (PPF) of US$95,, which was approved on March 29, Cost of works were estimated on the basis of consultant's final design studies for works to be carried out in tl. first four provinces. All cost estimates for civil works and equipment are based on recent bid prices and quotations for similar works or supply Since goods and equipment for project purposes would be imported free of customs duties and internal taxes, base costs are net of tax liabilities. Taxes on locally procured goods (mainly cement and fuel), estinuted at 6 percent of local costs, have been included in the estimate. They amount to FBu 32.9 million (US$. 19 million) Physical contingencies of 1 percent have been added to the cost of the works assessed on the basis of final designs and have been included in the provision for works that will be carried out after final design studies. The same rate bas been applied for equipment and operating expenses. Physical contingencies of 15 percent have been added to the base cost for works estimated on the basis of the feasibility study. No physical contingencies were allowed for technical assistance, training and consulting services. The total amount of physical contingencies, US$3.44 million, represents 8.2 percent of total base costs The project cost estimates by component and categories of expenditures are summarized in tables 3.2 and 3.3 below and detailed in annex 7. A. Rurat uater suplty systes Table 3.2 Project Cost Summary by Component Percent Percent (US$ million) (Fou million) of of Local Foreign Total Local Foreign Total Total Foreign -1) Ngozi and Muyinga X 73.3x (2) Karuzi and Kayanza X 69.6X (3) Gitega and Muramvya X 76.4X (4) Cibitoke, Bubanza and Makanba X 77.8X B. Springs X 62.5X C. lnastitution building (1) Project Unit (PAEMR) X 63.7K (2) DGHER X 95.7X (3) Communal Water Utilities X.X (4) REGIDESO studies X 1.X Refinamcin of PPF X 1.X Totat Base costa X Physicel Contingencies K 68.6K Price Contingencles X 55.X GRAM TOTAL X 7.X Prices as of June 199.

21 Table 3.3 Project Cest Sunmary by Type of expenditures Percent Percent (US$ million) (FBu million) of of Local Foreign Total Local Foreign Total Total Foreign Equipment, Pipes X 99.9X Civil Works X 52.1X Technical Assistance X 95.O Training K 42.3X Operating Expenses X.K Consulttiig Services X 97.6X Refinancinq of PPF X 1.O Total Base Costa Z X 73.4x Physical Contingencies X 68.6X Price Contingencies K 55.X TOTAL X Prices as of June Price contingencies have been added to base cost plus physical contingencies. Price contingencies for local currency expenditures are based on domestic inflation estimated as follows: 8 percent in 199, 7 percent in 1991, 6 percent in 1992 and 5 percent thereafter. Price contingencies for foreign currency expenditures, are based on recent estimates of international inflation as follows: 6.3 percent in 199, 9. percent in 1991, 1.1 percent in 1992,.4 percent in 1993, 1.6 percent in 1994, 3.8 percent in 1995, 4. percent in 1996 and 4.7 percent in Price contingencies are estimated at US$9.21 million, or 21.9 percent of total base costs. Priect FlnançinL Plan 3.15 The proposed project would be financed by: (a) an IDA credit of US$32.7; (b) a!cfw grant of DM 9.5 million (US$6.2 million); (c) a Belgian grant of BF 378. million (US$12.6 million); and a Burundese contribution from Govemnment and communes of US$3.2 million equivalent. The financing plan is indicated below, in US$ million: Table 3.4 Project Financing Flan Percent Local Foreign Totat of Total IDA Credit X KfW Grant X AGCD Grant X Sub total X Government and Communes X Total OX 3.16 During negotiations agteement was reached tdat -he the communes served by the project would contribute the equivalent of 5 percent of the cost of the works excluding pipe supply or about US$.85 million (FBu 14 million). This contribution could be in the form of labor, primarily for earthworks and supply of building mataerials, or monetary contribution (para.7.1 (g)) The proposed IDA credit would finance 59.8 percent of total project cost, including 62.4 percent of foreign exchange requirements and 53.7 percent of local costs. The credit and grants and the government contribution for the rumal sub sector would be provided to the executing agency (DGHER), and to the communes a grants.

22 IMRIentati 3.18 DGHER would be the implementing agency for the the project, except for REGIDESO studies which would be carried out under responsability of MEM. The general director of D(HER would be assisted by a project unit financed by the project The project unit (PAEMR) created in the rural water supply project under the authority of DGHER would continue to coordinate the project implementation. At the end of the project, the project unit would be merged into DHA under DGHER according to the conclusions of the proposed organization study: PAEMR's directorate would become the water planning department of DWHER. The maintenance unit would continue to provide assistance to the communes as a department of DGHER. 3.2 PAEMR would comprise thres units under the esponsibility of the director: (a) PAEMR's directorate. This unit would include a project director, an adviser (job description in annex 15) and four support staff (an administrative assistant, an accountant, a secretary, and a driver). The unit would program project execution and provide for monitoaang and supervision. This task would include preparing consolidated project accounts, quarterly reports, studies, audits and the project completion report. (b) The maintenance unit. This unit would include a maintenance engineer (job description in annex 15, financed by AGCD), a counterpart and five sanitary engineers. Its role will be to insure technical control of the systems in operation, to train communal attendants and to assist the communal water utilities with maintenance problems. (c) (d) The accounting control unit. This group of four accouatants would be responsible for on-the-job training of communal accountants and for annual control of the accounting system of the communal water utilities during the first four years of in;;iementation. Thereafter this control would be carried out by the inspection of communal projects in the ministry of the interior. The sensitization unit. This unit would have ten people: a community development expert (job descrition in annex 15), a counterpart and eight social workcers. This unit would help the communes set up communal water utilities and would develop community awareness program to educate the population about the public health implications of safe water snd the need to support such services by paying for the water. This program is expected to be completed in four years Construction of the water works would take place in lots corresponding to the supply of pipes and the implementation of construction by provinces or group of provinces. Each cofinancier would finance different lots in line with its own procurement regulations. Tie development and protection of springs would be carried out by UNICEF and NGOs. Annex 5 shows the pro'ect implementation schedule For Gitega and Muramvya provinces, a feasibility study is underway and would determine the needs of water supply systems to be constructed. Tie projects would be submitted to IDA for review, selection and approval. The priorities would be based on per capita investment costs and the capacity and willingness of the population to pay the fees involved. Thereafter final design for selected systems would be prepared and the program will be implemented Consultants would provide engineering services for feasibility studies, final designs and supervision on terms considered acceptable by IDA or other cofinanciers. Training and Sensitization 3.24 Training programs would be established to strengthen institutions and personnel at all levels of DGHER, tie communes sed the communal water utilities. Tue training program would: (a) upgrade the skills of DGHER and PAEMR senior staff; (b) improve t1,e skills of the maintenance staff of DGHER and the communa!

23 water utilities; (c) educate communal administrators and representatives of user's associations in the use of water supply systems; and (d) upgrade the knowledge of communal accountants in accounting, financial reporting systems and collection procedures Sensitization would be mainly addressed to the population and the communal and user's association personnel to raise their awareness rcgarding the advantages of higher-quality potable water and of maintninz the systems by paying a fair price for the water The training program would include short-term seminars abroad for DOHER and PAEMR senior staff, and training sessions in Bujumbura for maintenance engineers and accountants of PAEMR, communal administrators and communal water utilities employees. A training program for communal accouatants, including accounting systems of communal water utilities will be carried out under the second urban development project (Cr 1968-BU). On-the-job training for water supply attendants and communal accountants would be provided by technical assi6tanco and by PAEMR personnel. A special unit would be created in PAEMR to implement the sensitization program. This program would tap the expertise of NGOs. Procurement 3.27 Contracts for civil wors (US$14.3 million) would be awarded after prequalification on the basis of International Competitive Bidding (ICB) and in accordance with the IDA's guidelines. A preference of 7.S percent would be applied to ICB bids from domestic civil works contractors. Contracts for simple or small works of low cost (5 contracts; aggregate value not to exceed US$8,), would be awarded through Local Competitive Bidding (LCB). The contracts would be advertised locaily but open to foreign bidders, following local procedures that will be acceptable to the Association. Tiese contracts would cover construction of the communal water utility workshops The development and conversion of the 3, springs scattered in the whole country involvecommunity participation and sensitization of population. It is proposed to contract directly the services of specialized and qualified NGO's and UNICEF to continue carrying out this kind of work in their respective areas, at an estimated cost of US$1.8 million. The Association would review proposed contracts between NGO's and Governement Contracts for supplying pipes (USS8.4 million) would be awarded on the basis of International Competitive Bidding (ICB) in accordance with IDA's guidelines. A preference equal to the applicable custom duties and other import taxes, with a maximum of 15 percent, would be applied to the bids of qualified local manufacturers participating in ICB. Ligit vehicles and office equipment for the DGHER and the PAEMR (aggregate value not to exceed US$8,) each valued at more tdan US$1, would be purchased through Local Competitive Bidding (LCB) following procurement procedures that wil be acceptable to the Association. Foreign suppliers are eligible to participate. Office equipment, furniture, and supplies contracts valued at les than US$1, would be purchased locally on the basis of at least tiree quotations, aggregating to US$25,. 3.3 T'e Association's guidelines would be used to select consultants for technical assistance (US$l.9 nillion), training (US$.4 million), and consulting services (US$3.7 million). The conmulting services include supervision of works (US$1.7 mrillon), final design (USS.6 million), and 3 studies (aggregate value US$1.2 million) and audits (US$.2 milion). Contracta financed by KfW and AGCD would be awarded under competitive bidding limited to nationals of their respective countries The Association would review tender documents and bid award procedures before invitating bids as well as bid evaluations and proposed contracts for au civil works estimated at more than US$3, and for equipment valued at more than US$S,. Selective post review of awarded contracts below the threshold levels should be carried out on about 1 in 4 works contracts, and 1 in 6 goods contracts.

24 Table 3.5 shows the procuement procedures and arount. Disburmanent Table 3.5 I!rocureent Anrangements (US$ million) Percent Project Etements ICB LCB Other of #.A. Total total Equ.ipent and pipes bi 14.7 (8.4) (.8> (.2) (9.4) 63.9X Civil works - Water systems bi 24.9 (12.9) (.7) (13.6) 54.3X - Springs (1.6) (1.6> 88.9X Technical assistance 3.1 bj 3.1 (1.9) aj (1.9) 61.3X Training.4.4 (.4) a/ (.4) 1.X Operating expenses (1.1) (1.1) 52.4X Consulting Services 6.7 b/ 6.7 <3.7) a/ (3.7> 55.2X Refinancinq of PPF (1.) (1.) 1.X TOTAL <21.3) (1.5> (7.8> (2.1) (32.?> Percent of Total 93.8X 93.7X 28.6X a/ Contracts award using IDA guidelines for engagement of consultants. b: Contracts financed by KfW and AGCO. Notes: Cost figures are rounded and include contingencies. Figures in parenthesis are the respective amonts that woutd be financed by IDA. Equipuent on tocal shopping represents US925,. Cost figures include taxes on locally procured goods estimated to USS.19 million Tiie schedule of credit disbursements, given in annex 12, is based on the disbursement profile for the rual water supply project (Credit 1625-BU), except that it bas been adjusted to reflect disbursement for the initial deposit in the special account sad refiuancing of the PPF. All disbursements will be made against normal documentation submitted to the Bank, except disbursements against opeating costs and eligible expenditures for contracts valued at US$2,O equivalent or less, which will be made under Statement of Expenditures (SOE). Supporting documentation for these would be retained by the PAEMR and REGIDESO and would be availablo "o IDA during supervision. The closing date would be June 3, To ensure prompt availability of funds for the project, IDA and the govemment would each make an initial deposit. The annual Govemment counterpart fonds in FBu totaling US$.45 million equivalent would be deposited in the Project Advance Account at the Central Bank as a condition of credit effectiveness (para.7.2 (a». The account would be replenished to the same amount quarterly (para.7.1 (h)). A separate Special Account (revolving fund) in US dollars would be established in a commercial bank with an initial deposit of US$1,5,O. Ihe Special Account opening balance was calculated as the equivalent of thre. months of IDA disbursements from the pruceeds of the proposed credit.

25 The table 3.6 below gives the categories to be financed from the IDA Crdit and the amoumts and the percentage to be funanced in each category: Table 3.6 Disbursements under IDA Credil Amowt of Credi t Percentage of ailocated expenditures Category (US$ million) to be f inanced 1 Equipment (a) pipes for Karuzi and Kayanz X of CIF or ex-factory (b> pipes for Gitege and Muramvya 2.5 expenditures (c) Equipment excluditn pipes.4 and 8X of local expenditures for Items procured locally. 2 Civil works (a) Karuzi and Kayanza 6.1 9X (b) Gitega. Muramvyand springs 5.2 9X 3 Technical assistance 1.6 1X at 4 Training.4 1X a/ 5 Operating expenses.8 7X untit December ; 5 from January 1, 1993 to December 31, 1995; 3X from January 1, 1996 to December 31, 1997; and 1% thereafter 6 Consulting Services 3.1 1X ai 7 Refinancing of PPF 1. Amount due 8 UnaLUoceted 7.4 TOTAL 32.7 a/ Burundi has agreed to exempthese contracts of taxes.

26 - 18- IV. IMPLEMENTiNGiAGENCX 4.1 The Borrower will bc the Government of the Republic of Buwmdi. DGHER would be the implementing agency for the project except for the REGIDESO studies which would be undertaken under the supervision of MEM. To ensue good communication betweon the "mistries and institutions involved, and to oversee project implementation, a steering committoe would be established, comprised of senior representatives of MDR, MEM, DGHER and REGIDESO. This committee would be convened every three months and would be chaired by MDR. The establishment of this committec would be a condition of effectiveness (para.7.2 (b)). DGHER Orianizadon and Manaumnent 4.2 The General Directorate for Rural Water and Energy (DGHER) was established in 1988 with the responsibility of improving the supply of potable water in rural areas and implementing rural electrification. The distribution of responsibilities between DOHER and REGIDESO is not clearly defined (see para. 2.6). The tranfer of water systems located in rurl coenters to the concemed communes would be a condition of disbursement for pipes acquisition for the provinces of Kamzi and Kayanza (jara. 7.3). The situation is the same for electricity services. Under the energy sector rehabilitation project ap: roied in April 1991, it was agreed that the issue for electricity would be resolved before June 3, The director of DGHER is appointed by the President of the Repu,lic, upon nomination by the MDR. The water and sanitation department (DHA) of DGHER has been the in ïplementing agency for the rural water supply project financed by IDA, which is almost comi leted. Annex 12 s iows the organization chart of DGHER. 4.4 DGHER's financial performance has to be assessed as that of a departinent of a ministry. While DGHER enjoys soms independence, its finmacial operations are embodied in the govemment budgetary system. With the exception of revenues associated with installing electricity meters and billing for electricity, DGHER does not have any financial resources of its own. These revenues amounted to FBu 6.7 million (US$.41 million) in 1988; the government contribution was FBu 87.4 million (US$.53 million). DGHER thus relies on government appropriations and donors' contributions. Staffing and Personnel 4.5 In July 199 DGHER had 11 employees, of which 45 in water operations. Approximately 2 percent of the staff is permanent. These employees are paid according to the salary structure of the public sector, which is significantly lower than that of parastatal agencies like REGIDESO. The remaining 8 percent are contract personnel who have higher wages, but do not have the benefits of permanent employment and may be dismissed at the end of their contract. A technical adviser for rural electrification is already in place financed by the Belgian Cooperation. 4.6 Administration and accounting for both water supply and rural electrification are weak. DGHER has recently hired an administrative and financial director and under the energy sector rehabilitation project, a fince and accountîug expert widl be recmited to improve DGHER's performance assisting in organizing the commercial and financial aspects. DHA lacks qualified technical staff, and to improve technical performance of this department, the Belgian Cooperation would extend the contract of the hydraulic engineer already in place asd the proposed project would provide training and equipment.

27 To strengthen its operational and managerial efficiency, a project unit (PAEMR) was established within DGHER under the rural water supply project. This unit was assisted by three external experts: a project coordinator, a maintenance engineer, and an accountant. This unit will be in charge of implementing the proposed project, assisted by a project advisor and a specialist in community relations (IDA financing), and a maintenance engineer (AGCD financing) (se. para. 3.2). Recruitment of these experts would be a condition of credit effectiveness (para.7.2 (c)). Accountine and Auditing 4.8 The law requires DGHER to maintain accounts on an accnual basis using the double entry system and in accordance with the national accounting system plan. In practice accounts and financial reporting systems are used to determine compliance with the authorized limits of the budgets for recurrent expenditures and investment. Neither consolidated nor separated balance sheets or profit and loss accounts exist for water supply and electricity operations. It is therefore difficult to abstract information and statistics on annual operating costs for these services. 4.9 Consumer billing is presently limited to DGHER's electricity operations in five centers, using the same tariff as REGIDESO. To what extent meters are regularly read, bills distributed, and revenues collected is difficult to assess given the dispersion of services in the country. Initially, in an effort to promote electricity consumption, DGHER installed connections without up-front payments and did not require regular payment of electricity bills. This resulted in arrears of about FBu 3 million as of December 31,1989, of which electricity sales accounted for 8 percent and connection charges for 2 percent. TIe major part (7 percent) is owed by private sector, the remaining part (3 percent) by government agencies. One of the najor tasks of the finance and accounting expert would be to improve billing, revenue collection and accounting systetns. 4.1 Systematic reporting of DGHER's operations is weak and somewhat irregular. Though an annual report is prepared, coverage varies considerably. The finance and accounting expert is expected to establish a monthly and quarterly management reporting system, mnd to e-:r te that balance sheets, income statements and fund flow statements are prepared shortly after the end of D(>1'C-R's financial year. Tie appointee will also establish procedures for allocating expenditures between Wati udi electricity During negotiations, it was agreed that DGHER woul i provide to the Bank: (a) quarterly reports covering the progrs of the prtect and other operations, w'.co-.dg to a system of monitoring indicators; (b) separate accounts for its water arid electncity operations from F': >1; and (c) a project completion report on the basis of a stipulated outline within six months of the closing date -n the credit (para.7.1 (i), (j) and (k» Under the rural water supply project, DGHER agrid mat its accounts and financial statements would be audited by an external auditor and submitted to the Bank s i,?in six months of the end of each fiscal year. DGHER's finance and accounting office has not been able tu st the six-month deadline. Audited accounts for 1987 and 1988 were delayed by up to one year. T'he i.eorta that have been received are heavily qualified. Auditors highlight the incomplete recording of accounting tansactions, the lack of accounting procedures, and deficiencies in the follow-up and monitoring of billirg, collection and transfer of revenues. Because of these deficiencies the books do not provide a reliable and &ccllrate picture of the financial position of DGHER. This situation will be improved as a result of the technical assistance to be provided under the energy sector rehabilitation project The audited financial statenients for 1989 and 199 are not yet available. Under the rural water supply project a short-term accounting expert has been recently recruited to put in order the DGHER's accounts before auditing. Presentation of the 1989 &ccounts to the Bank was a condition of negotiations. The auditing firm has been hired and presentation of the 1989 and 199 audit reports would be a condition of credit effectiveness (para.7.2 (d)). During negotiations, assurance was obtained that the DGHER would provide witiin 6 months of the end of each fiscal year (a) its audited financial statements; and (b) the audited accounts for the rural components of the proposed project (par. 7.1 (1)).

28 -2 - V. FINANCIAL ANALYSIS A. SuL M 5.1 Under the rural water supply project, a system of water charges was implemented in the 33 communes covered by the project. The charges for water consumption were set to: (a) guarantee the proper maintenance of the systems financed under the project, and (b) to sustain the operating utilities. The proposed project is expected to extend the same cost recovery approach to the whole country. 5.2 The facilities wili be handed over to the communal water supply utilities (and to the intercommunal water authorities). These entities will be responsible for O.& M. and replacement. The govemment will retain responsibility for servicing the credit received for the proposed project. Accordingly, this credit will not appear in the financial accounts of the water utilities or the commnunes. Demand Projections 5.3 Projections of water consumption have been made for three separate categories: standpipe users, private connections and public connections. Standpipe users are assumed to have a demand for 2 Icd when the systems become fully operational (between 1994 and 1996). This demand is assumed to remain at this level until 25, the last year for which demand and financial projections are made. Consumption is expected to rise with the population; estimates for increases in each of the provinces range from 2.7 to 3. percent a year. Standpipe users will be responsible for almost 9 percent of all consumption (see annex 9). Private connection users are assumed to have a consumption of 1 Icd and an annual growth rate of about 3 percent, while consumption from public connections (schools, hospitals, govemment offices) is expected to grow on the average by 15 percent a year. Oneration and Maintenance, Renewal Coasl 5.4 O.& M. coste are calculated taing account of the length of each system, and include permanent and temporary personnel costs, administrative expenses and a provision for smaul repairs. Renewal costs are determined on the basis of a 4-year life for civil works, pipes, and buildings and calculated to increase by.1 percent a ycar, starting froin.5 percent of the investment the first year of operation. Water Revenues. Water Tariff and Annual Fee 5.5 Water revenues are calculated to cover the expenses of the communal water utilities and generate a 5 percent income to finance small extensions. Operation and maintenance costs and renewal charges are projected ta1ing into account a 6 percent inflation rate from the time the system is fully operational until 1996 and 5 percent thereafter. Projections have been made on the basis of a collection rate of 75 percent. There is no assumption of voluntary work in the projections. Income statements per conunune are shown in Annex Water revenues would be deposited in a special account at the 'Coopératives d'epargne et de Crédit' (COOPECs) or local banks and used to pay the expenses of the communal water utilities including permanent and temporary personnel salaries, administrative expenditures, operating costs, repairs, small extensions of the systems and replacement. The communal project inspection department of the Ministry of Interior would inspect the financial accounts of the communal water utilities. 5.7 Based on acual costs, including O.& M. costs and renewal charges, excluding the financial charges for the credit, the water tariff per cubic meter for public and private connections in 199 real terms ranges from FBu 38 to 68 (US 23 to 41 cents). Based on the same assumptions, the annual fee in 199 value

29 for a family using a standpipe would range from FBu 455 to 1,25 (US$2.75 to 6.2). Annex 9 shows the amount of annual feus and the water tariff per commune. 5.8 Dunng negotiations assurance was obtained from the govemment that: (a) water tariff for public and private connections and annual fec for standpipes users b. sufficient to cover operation, maintenance and renewal costs; (b) charges be reviewed annually by end of October of each year to determine their adequacy; (c) revenues be deposited in a separate accouzt and payments from this account be made only for expenses related to water supply; (d) water accounts of communal water utilities bh annually verified by the inspectors of the Ministry of Interior; and (e) reports related to the inspection of the accounts bh made available to the Association for its review (para.7.1 (m». Affordabilitx 5.9 In most of the water systems the annual fee per family would amount to 1.2 to 2.8 percent of annual average cash income 1/. It is generally agreed that such a contribution for safe water is acceptable if it remains below 3 percent. KfW recently proposed an annual fee of FBu 1, for beneficiaries in the provinces of Ngozi and Muyinga which represents about 2.8 percent of the average cash income. When some beneficiaries incomes are well below the average, the communes will have to provide subsidies for these users, or include a level of cross-subsidy in the tariffs. 5.1 During construction the communes served by the project would contribute the equivalent of 5 percent of the cost of the works excluding pipe supply and this contribution could be in the form of labor. Community participation in construction poses no difficulty as the population traditionally contributes half a day a week to improve communal facilities. This labor would be made more productive by the involvement of NGOs that have some experience in working with the communes. After construction the effect of the project on communal budgets would be minimal because recurrent expenditures would be puid for by the beneficiaries. If the water board fails to fulfill its functions, the commune would continue to pay the salary of the communal water attendants already in place. Past Financial Performance B. Urban Sub sector - REGIDESO 5.11 Salient features highlighting REGIDESO's historical operating results and present positions are sualyzed in the SAR of the recently approved energy sector rehabilitation project and are shown in detail in aunex 11. REGIDESO's revenues from the sales of electricity and water increased from FBu 1,542 million in 1987 (US$1.3 million) to FBu 1,836 million (US$12.2 million) in This represents an increase of about 2 percent. Excessive capital investments, inordinate borrowing, and the devaluation of the FBu have brought total expenses, which have increased of about 95 percent from 1987 to 1989, to levels incompatible with revenues. As a result, loses increased from FBu 331 million in 1987 (US$2.2 million) to FBu 3,33 million in 1989 (US$22 million). lmgrovements of Presen Situation 5.12 To improve its performance REGIDESO has agreed under the energy sector rehabilitation project to: (a) implement a management assistance partnership program ; (b) implement a financial restructuring plan; (c) reduce the staff of permanent agents to about 6 in 1993; (d) implement a trining program; (e) implement an intensive program of new connections in urban areas; (f) reduce the amount of its teceivables; (g) review annually electricity and water tariffs after exchange of views witb the Bank; and (h) improve administrative buildings and facilities. L lu rnual arems die annual average cash income is estimated at about FBu 36, in 1989.

30 On the basis of the audited accounts for 1989, REGIDESO's capital restsucturing would requite an additional capital increase of FBu 1.4 billion before an acceptable debt-equity ratio is achieved. The capital increase docs not roquite a new outlay from the government, but outstanding current liabilities estimated at about FBu 3.4 billion, would bave to be converted to equity. In addition, KFW (Germany) and CCCE (France) have agreed to forgive part of their loans to the goverament for investmests by REGIDESO as a further increase in equity. Tmes matters are under study by the government. Finally, the ongoing revaluation exercise is expected to result in a revaluation s"plus of about FBu 25.4 billion that, according to internationally accepted accouating practices, could be used to absorb exchange loses and help in the financial restructuring. Arrars and CObgI» 5.14 At the end of 1989 the balance on receivables for both electricity and water amounted FBu 1,272 billion (US$8.5 million) of which 73 percent from the private sector, and represented 8.6 months of sales. Through compensation of debts all the balances due from govermnent and municipalities as of December 31, 1988, were paid in At the end of march 199, 41 percent of the amount due had been paid so that arrears represent 4.4 months. A policy of systeniatic cut-off of electricity for delinquent accounts was established in September 1989 and have resulted in some improvements in billing and collection. During negotiations, agreement was reached that REGIDESO would set up a similar policy for systematic cut off of water hi the case of delinquent water accounts of more than 3 months (para.7.1 (n». Water Tarif At an average of Fbu 4 (US 24 cents), the level of present water tariff per m3 is insufficient. In 1987 the cost per m3 calculated on the fuu cost basis was FBU 54. Furthermore, the structure of tariffs which ranges from FBu 36 to 44 (US 22 to 27 cents) is inadequate. During negotiations, agreement was reached that a first step tariff increase of 15 percent for users wihose consumption is higher than 1 m3 per month, would be implemented before December 31, 1991 (para.7.1 (o» The proposed project would finance a study to update tariffs, the structure and level of which are to retlect the real cost of service, while also taking into account the financial capacity of the various income groups of consumers. During negotiations agreement was reached that (a) the Government would present to the Bank an action plan for implementation of new tariffs based on the findings and recommendations of tus study by July 1992 (para.7.1 (p»; (b) implementation of these tariffs would begin in Septem'v-r 1992 and should be completed by September 1995 (para.7.1 (Oq; and (c) the Government would undertake an annual review with the Bank of REGIDESO's water tariffs by the end of October (para 7.1 (r». feflo[tance ConËrac 5.17 A comprehensive study of REGIDESO was completed by a management consultant in April The suggested rehabilitation program was reviewed by the govemment and approved by all the principal donors (KfW, GTZ, CCCE end IDA). This program was incorporated in a performance contract signed between the govermment and REGIDESO in July In compliance with the performance contract, the government increased electricity tariffs in April 199, restructwred the board of directors of REGIDESO, paid all public debts as of December 31, 1988, and authorized a capital increase as compensation for past debts. Some improvements have already also ben noted, such as a new policy to increase connections, a reduction in the delays for billings to 15 days, deposit of cash surpluses in revenue-producing bank accounts, a reduction in personnel (23 in 1989), mad the creation of planning and internal auditing units. To help REGIDESO implement the performance contract, the energy sector rehabilitation project will finance a management asstance partneraisp program with an operator experienced mi the mnanagement mad rehabilitation of public utilities md which would have responsibility for some key activities in the financial, commercial, planning, mnd pe- om _agmt mias.

31 Future financial Poition 5.18 The projected financial statements of REGIDESO from 199 to 2 are presented in annex 11. Actions mentioned earlier produced positive levels of operating income (before interest) in 199. Thereafter income rises to FBu 2,155 million in All expenses, including interest, would be covered by revenues in In 199 REGIDESO financed about 33 percent of its investment program, and would maintain that amount in the future. The rate of return on fixed assets was only.9 percent in 199, and would increuse to 2.9 percent in 1991, and 4.9 rercent in The debt service coverage ratio improves from 1.17 in 199 to 2.22 in REGIDESO's liquidity position becomes comfortable with an increase in the current ratio from 1.17 in 199 to 1.56 in 1995 and the debt-equity ratio is satisfactory throughout the period. With improvements in management and operational efficiency, satisfactory investment programs, adequate electricity and water tariffs, and the financial restructuring described above, REGIDESO can become financially viable.

32 VI. ECONOMIC AND SOCIAL ANALYSIS lroiject Benefit 6.1 The proposed project will directly benefit some 1,15, people, providing safe potable water through developed springs, standpipes or house connections. It is not possible to quantify the health benefits due to safe water since many factors influence improvements in health. Nevertheless, the water-bome diseases that are prevalent in Burundi (see Annex 3) would be checked and the number of sick days is expected to decline. Family members, almost exclusively women and children, travel long distances for water every day, particularly in the dry season. In nuav cases the possibility of drawing safe water close to the living areas should provide time savings that can bc used for other activities. 6.2 A further important benefit is the gain from developing communal responsibility for local utilities. The principle of communal participation should reinforce the communal structure and serve as the basis for other improvements in human resource development. Local management of the water systems should ensure proper O.& M. and demonstrate to the beneficiaries that the fees will be more than offset by their improved physical well-being due to a safe water supply. With regard to institutional aspects, the proposed project would not only benefit the communes but would also result in improvements in planning, executing, supervising and operating rural water systems at the country level. This institutional strengthening should provide the basis for extending and replicating future water systems and other social investments. In addition, the project will enhance the cost recovery mechanisms in urban areas, and therefore improve the financial situation of REGIDESO. Prooect lustification 6.3 The proposed project will provide safe potable water supply for 24 percent of the rural population. The resulting improvement in health standards will contribute to the country's goal of developing human resources and increasing agricultural production. The principle of delegating responsibility for the water systems to the local level is a step toward decentralization, and should minimize the incremental burden on the national budget. Least Cost Solution 6.4 The project selected the most economic alternatives for meeting the demand. Wherever possible, springs and gravity water systems were identified and proposed. All the systems requiring pumping stations or treatment plants were rejected because the population could not afford the expenses of O.& M.. Environmental lnmact 6.5 An assessment was made at the project appraisal stage of the potential enviroumental impact of the proposed project. The rural water supply systems and the development of springs have been designed taking into account environmental considerations and they would reduce water losses and contamination. fle only negative enviroumental impact of the proposed project could result from the unsafe disposal of used water. fle water quantities that will be drawn from public standpipes and yard connections, however, will be relatively small. Therefore, the threat of pollution of aquifers is negligible. On balance, the environmental impact of the proposed project can therefore be considered positive. 6.6 Concerning future studies, they should cover such environmental issues as pollution resulting from increasing of water consumption. In addition suitable safeguards will be incorporate in bidding documents and contracts to minimize potential environmental damage caused by civil works.

33 -25 - Women's Rrle 6.7 As in most African countries, provision of water in Burundi is the woman's task, with assistance from the children. Women are responsible for food preparation and use most of the family's water. This project would reduce the time women spend collecting water and allow them to engage in more productive activities. It is important that a significant number of women be elected to the commune-wide users committees and communal water boards. Families would be less reluctant to pay for water if women were responsible for collecting water charges. Jmpact on Poverty Group 6.8 The poverty threshold is estimated in 1989 at 4 percent of the per capita GNP (US$8). Assuming a family of 4.6 persons, the poverty threshold is US$368 per family per year, or FBU 6,72. This sum is about the average revenue, including self consumption, in rural areas. Therefore the poverty group in the project areas is estiniated at 7 percent of the total population covered by the project, which represents about 8, people at the time of project completion. Project Risks 6.9 The proposed project largely builds on experience gained during the rumal water supply project and other Bank-fmanced projects. The major risks are not associated with the design and construction of the water systems, but with sustained maintenance of the systems in rural areas. Experience in Africa has siown that tie best results can be obtained by delegating responsibility to the village level and fostering the sense of communal ownership. Questions remain as to whether the population can be sufficiently motivated over a long period to pay the fees and to join in communal efforts when the system needs repairs. The training and technical assistance provided to DGHER, as well as the sensitization program for the population, should minimize this risk. 6.1 However, it would not be prudent to assume diat the communal water utilities could solve ail the maintenance problems on their own. The necessary outside support would be provided by DGHER. This raises the question of whether DGHER could provide this, even after completion of the project. Tue techuical assistance and the comprehensive training program provided to the maintenance assistance unit of PAEMR, which would be a department of DGHER at the end of the project, would reduce this risk tg acceptable levels In the urban sub sector the main risks are that (a) the govemment may resist further increases in water tariffs; and (b) REGIDESO may be reluctant to implement the program proposed under the energy sector rehabilitation project. The fact that the government decided to increase electricity tariffs recently, and the interest of REGIDESO in preparation of the rehabilitation program suggest these risks are low.

34 -26 - VII. AGREEMENTS REACHED AND RECOMMENDATIONS Agreements Reached at Negotiations 7.1 During negotiations, assurances were obtained from the government on the following points: (a) (b) (c) (d) (e) (f) (g) Oi) Before June 3, 1991, instructions for standpipes management and payment of water by users in centers operated by REGIDESO would be sent to local authorities (para. 1.16) Before the end of 1993, the financial and institutional arrangements for the rural water supply subsector would be formalized, taking into account the experience g8ined after three years of implementation of the new policy (para.2.8); Before starting works in a specified commune the communal water utility would be established (para.2. 1); During project implementation, updated tdree-year expenditure and investment prograns would be submnitted to IDA annually by October 31 for review and comments (para.2.18); The Association would be given the opportunity to review DGHER's budget each year for the following fiscal year (para.2. 18); A mid-term review would be organi.-ed by December 1994, concurrently by IDA and government to assess the project achievements and to take the corrective measures that might be needed (para.3.7); The communes would contribute the equivalent of 5 percent of the cost of the works excluding pipe supply. This participation could be in the form of labor-or monetary contribution (para 3.16); The project advance account would be replenisied quarterly with government counterpart funds in FBu to bring the level of the account to US$.45 million equivalent (para.3.34); (i) DGHER would present separate accounts for its water and electricity operations from 1991 (para ); (j) (k) Quarterly progress reports would be prepared by PAEMR and submitted to IDA within two months after the end of the quarter (para.4. 11); DGHER would prepare a completion report and submit it to IDA within six months of the credit closing date (para.4.11); (1) Accounts of DGHER, as well as project accounts, would be audited annually by external auditors acceptable to IDA, and audit reports would bu subniitted to IDA within six months of the close of the fiscal year (para.4.13); (m) Water charges would be sufficient to cover opemtion, maintenance end renewal costs and would be reviewed annually by the end of October to determine their adequacy; revenues would be deposited in a separate account and payment from this account be made only for expes related to water supply; water accounts of communal water utilities would be verified annually by the inspectors of the government; snd reports related to the inspection of th. accounts would be made available to the Association for its review (para.5.8).

35 (n) (o) (p) (q) (r) REGIDESO would set up of a policy for systematic cut off of water in respect to delinquent water accounts (para.5. 14); Urban water tariffs for users whose consumption i8 higher than 1 m3 per month would be increased by 15 percent before December 31, 1991 (para.5.15). New structure and level of urban water tariffs would be prepared by REGIDESO and submitted to the Bank, as well as an action plan for implementation of new tariffs by July 1992 (para.5.16); Implementation of new tariffs would begin in September 1992 and should ba completed by September 1995 (para.5. 16); and The govermment would undertake annual reviews with the Bank of REGIDESO's water tariffs by the end of October (para.5. 16). Conditions of Effectiveness 7.2 Before effectiveness of the proposed credit, the govermmat should have: (a) (b) (c) Established a project advance account in FBu in the BRB, and made an initial deposit equivalent to US$.45 million (para.3.34). Established a steering committee to oversea project implementation (para.4.1); Hired the three technical assistants for the execution of the rural water supply components of the project (para.4.7); and (d) Sent to the Bank the audit reports of DGHER's accounts for 1989 and 199 (para.4. 13). Conditions of Dishursement 7.3 Transfer of water systems located in rural centers to the concerned communes should be effective prior to any disbursement for the pipes acquisition for the provinces of Kani and Kayanza (para.2.6 and 4.2). Recommendation 7.4 With the above assurances, agreements and conditions, the proposed project would be suitable for an IDA credit of SDR 24.2 million (US$32.7 million).

36 -28- Annex 1 Page 1 of 6 BURUNDI SECTEUR DE L'EAU ET DE L'ASSAINISSEMENT LETTRE DE POLITIOUE SECTORELLE A. SituatiOn Actuelle du Secteur Organisation Institutionnelle 1. L'eau potable dans les centres urbains est produite et distribuée par la REGIDESO, entreprise publique créée par le décret-loi No. 1/196 du 2 Octobre La REGIDESO est supervisée et contrôlée par le Ministbre de l'energie et des Mines. Aux termes de l'article 3 du décret No. 1/12 du 11 Mars 1986, portant modification des statuts de la REGIDESO, l'établissement a pour mission 'le captage et la distribution d'eau...dans les centres jugés importants par les autorités compétentes". Pris le même jour, le décret No. 1/13, portant classification des centres urbains, déterminait 23 centres en plus de la capitale: deux villes principales, neuf villes secondaires, dix centres à vocation urbaine et deux centres ruraux. Ces 23 centres sont le domaine d'action de la REGIDESO, en plus de Bujumbura. 2. L'eau potable en milieu rural est la responsabilité de la Direction Générakl de l'hydraulique et des Energies Rurales (DGHER), du Ministère du Développement Rural. Cette stucre avait été créé par décret No. 1/18 du 2 Février 1979, sous le nom de Département de l'hydraulique et de l'electrification Rurales (DHER). Le décret No. 1/29 du 22 Décembre 1988 l'a transform6 en la DOHER, avec un Département de l'hydraulique et de l'assainissement (DHA). 3. L'assainissement en milieu urbain est contrôlé par le Mînistére des Travaux Publics et du Développement Urbain. La Régie des Services Techniques Municipaux (SETEMU), crée par le décret No 1/162 du 12 Juillet 1983, et réorganisée par celui No 1/151 du 2 Juillet 1989, placée sous la tutile de la Mairie de Bujumbura, a en charge, dans la capitale, l'assainissement des eaux usées et pluviales. Elle s'occupe également de l'enlèvement des ordures ménagàres, de l'entretien de la voirie, de la construction et de l'entretien des équipements municipaux. Le financement de la SETEMU est assré notamment par la municipalité de Bujumbura. L'assainissemet des centres secondaires urbains est de la responsabilité des communes assistées par le Ministère des Travaux Publics et du Développement Urbain. 4. Le décret No. 1/226 du 11 Décembre 1989 a cré la Commission Nationale de l'eau et de l'energie, chargée de coordonner les actions dans ces secteurs. Elle est présidée par le t 'inistre ayant l'energie dans ses attributions, et comprend deux sous-commissions: une sous-com"ission nationale Je l'eau et une sous-commission nationale de l'énergie dont les membres ont été nommés par l'ordonnance Ministérielle 76/74/9 du 1 Février 199. Niveaux de Service 5. Environ 92 % de la population urbaine est desservie en eau, 49% au moyen de branchements particuliers et 52% par des bomes-fontaines. Dans les zones ruales, le taux de desserte est passé de 22% en 1982 à 48% à la fin de 199, sur une population urale de 5.3 millions. Le taux de desserte varie considérablement d'une province à l'autre. Environ 17% de la population rurale est desservie par des adductions, 31 % par des sources aménagées et,3 % par des puits. Au début de l'année 199 il y avait en service 338 adductions, alimentant 2765 bomes-fontaies et 1921 branchements particuliers, 11 sources aménagées et 97 puits.

37 Annex Page 2 of 6 6. Pour l'assainissement il est estimé que 2% de la population de Bujumbura utilise des fosses septiques ou des latrines améliorées, ce pourcentage étant le même pour le milieu rural, où seules sont utilisées des latrines. B. Politique Sectorielle du Gouvemement Objectifs du Gouvernement 7. Les objectifs du Gouvernement pour l'an 2 sont, pour l'eau potable, d'assurer un niveau de desserte de 98% dans les centres urbains et celui de la totalité des populations des zones rurales, sous la réserve de leur équipement dans des conditions géographiquement possibles. Pour l'assainissement, l'objectif est que 7% de la populationde la ville de Buiumbara, et 6% de celle des centres urbains et du milieu rural dispose d'un systhne adéquat d'assainissement, pouvant aller, suivant les zones, de l'assinissement collectif aux fosses septiques et aux latrines améliorées. Afin de satisfaire ces objectifs, la politique sectorielle du Gouvernement est la suivante: Recouvrement des Coûts 8. La politique du Gouvernement est que la totalité des coûts soit supportée par les bénéficiaires dans les centres urbains, aussi bien pour l'eau que pour l'assainissement. Dans cette optique, les tarifs de l'eau et les futures xodalités de recouvrement des charges de l'assainissement feront l'objet d'une revue régulière permettant de les ajuster à l'évolution des coûts, l'objectif étant d'atteindre en plusieurs années le coût marginal à long terme. En particulier le Gouvernement veillera à ce que soient appliqués les articles 11 et 24 du Contrat Plan signé entre la REGIDESO et le Gouvernement en date du 7 Juillet 1989, conformément au plan d'action figurant en partie D de la présente lettre. 9. Dans les zones rurales, le Gouvernement est décidé à ne faire prendre en charge par les populations bénéficiaires que les fais de fonctionnement, d'entretien et de renouvellement, le coût des investissements restant à la charge de l'etat. Cette politique pourra être revue à moyen terme, pour tenir compte de l'amélic ion espérée de la situation économique des populations rurales. Délimitation des Responsabilités entre REGIDESO et DGHER 1. Le Gouvemement a confié à la REGIDESO la gestion de centres ruraux qui ne figurent pas dans la classification des centres urbains définie par le décret No. 1/13 du Il Mars 1986, mentionné ci-dessus. Le Gouvernement, par souci de bien définir les responsabilités de chacun et en application de sa politique de décentralisation, fera rétrocéder la gestion de ces centres aux communes concemnes. Là où l'appui technique de la REGIDESO s'avèrera indispensable, les communes concernées passeront avec REGIDESO un contrat d'entretien technique des installations, moyennant une rémunération. Pour couvrir ces frais, la commune gardera la responsabilité de percevoir les redevances n6cessaires auprès des populations bénéficiaires. Néanmoins, la commune sera libre de confier l'entretien technique à une société privée si elle le préfsre. Dl5centralisation des ResRgonsabilit&s En milieu rural: 11. Au cours de sa sdance du 16 Août 199, le Conseil des Ministres a analysé les problèmes relatifs à l'alimentation en eau en milieu nual. Il a pris la décision de faire préparer par le Ministre de l'intérieur le Ministre du Développement Rural et le Ministre de l'energie et des Mines une Note d'instructions à adresser à tous les Gouvemneurs de Provinces et à tous les Administrateurs Communaux.

38 - 3 - Annex 1 Page 3 of Cette Note d'instruction confie aux communes la responsabilité de l'approvisionnement en eau potable de leurs populations. Les communes sont propriétaires de toutes les installations d'alimentation en eau se trouvant sur leur territoire, à l'exception de celles gérées par la REGIDESO. Le Gouvemement, à travers les services ayant l'hydraulique rurale dans leurs attributions, assurera aux communes l'assistance technique nécessaire pour les aider à exploiter correctement les infrastructures existantes et à en construire de nouvelles chaque fois que cela sera nécessaire, et que les moyens le permettront. 13. Dans chaque commnune sera créée une Régie Communale de l'eau, dotée de l'autonomie financière. Les modalités d'organisation et de fonctionnement de la Régie sont précisées dans la Note d'instructions diffusée auprès des Gouvemeurs de Provinces et des Administrateurs Communaux sur l'organisation de l'approvisionnement en eau en milieu rural. 14. La régie communale de l'eau prendra en charge les salaires des fontainiers et autres personnels travaillant pour la régie, les achats d'outillages et de foumitues, les travaux et la provision de renouvellement. Ces dépenses seront couvertes par le produit des ventes d'eau aux abonnés disposant d'un branchement particulier, et des redevances perçues auprès des usagers des bomes fontaines publiques, sources aménagées, puits, etc. La perception des factures d'abonnés est assurée par le fontainier qui relève les compteurs et celle des redevances par le responsable de point d'eau. Ils transmettront la recette au trésorier de la régie qui la déposera au compte ouver^ au nom de la régie dans une banque ou autre institution financière. Un contrôle bimestriel sera assuré par les responsables (trésorier et président) de la Régie. 15. Le Gouvemement prendra les mesures nécessaires pour que les comptes des régies communales soient vérifiés chaque année par les services concernés du Ministère du Développement Rural et du Ministere de l'intérieur. 16. Dans le cas où plusieurs communes devront se grouper pour réaliser et exploiter en commun un ou plusieurs réseaux d'alimentation en eau, il sera créée une Régie Intemmunale de l'eau, qui fonctionnera suivant les mêmes principes. En particulier, un Comité Intercommunal d'usagers sera créé pour la gestion des réseaux. Les relations entre les bénéficiaires des infrastructures hydrauliques et la Régie Communale de l'eau s&n' diéfinies par le Règlement de la Régie Communale de l'eau, le même pour toutes les communes. En milieu urbain: 17. Au cours de sa séance du 21 Février 1991, le Conseil des Ministres a analysé les problèmes relatifs à la gestion des bornes fontaines en milieu urbain, et a pris la décision de faire payer l'eau aux usagers de ces points publics de distribution. Il a décidé qu'une Note d'instructions, à adresser à tous les Gouverneurs de Provinces, au Maire de Bujumbura, et aux Administrateurs communaux, soit élaborée dans les meilleurs délais, comme on l'a fait pour le milieu rural. 18. Cette Note d'instructions confie à la Mairie et aux communes la responsabilité et la gestion des bornes fontaines par la création de Comités d'usagers par avenue. Chaque Comité d'usagers sera composé de trois membres. 19. Chaque ménage utilisateur d'une borne fontaine devra participer aux frais de production, de distribution, et de gestion de la REGIDESO, en versant une redevance annuelle minimum de 1.2 FBu au Comité d'usagers. Cetre participation forfaitaire pourra étre revue en fonction des cogts de la REGIDESO. 2. La totalité des sommes collectées par les Comités d'usagers seront remises à la Mairie et aux communes. Elles permettront de règler les tactutes émises par la REGIDESO. Ces factures correspondront aux consommations réelles d'eau aux points d'eau publics. 21. Le suivi de cette organisation sera assuré par l'administration en Mairie de Bujumbura et dans les Communes urbaines. Elles devront organiser des réunions de coordination et de mise en place des Comités d'usagers par zone et par quartier, et de sensibilisation des populations utilisatrices des bornes fontaines.

39 Annex Page 4 of Les modalités d'application de cette Note d'instructions seront revues et adaptées si nécessuires après une année d'expérience. C. P_gra_mMe de _%elgpoment de l'alimentaton m FA Zn milieu rutal 23. De nombreux programmes, qualifiés de desserte maximale, viennent d'6tre lancés avec l'aide de différents bailleurs de fonds: IQJŽ: Provinces de Kayanza et Karuzi. Les études d'exécution sont en cours et seront terminées à la fin du premier semestre adductions pour un montant de 15 millions de dollars E.U.; Provinces de Gitega et Muramvya. Les études de faisabilité sont en cours de réalisation. Le financement prévu pour les travaux est de 9 millions de dollars E.U.; KfW: Provinces de Ngozi et Muyinga. Les études d'exécution, financées par IDA, sont terminées. Douze adductions pour un montant de 1 millions D.M.; Province de Ruyigi. La consultation a été lancée pour les études de faisabilité; Provinces de Bujumbura et Bururi. La consultation pour l'étude de faisabilité sera lencée au cours de l'année AGCD: FED: Provinces de Cibitoke, Bubanza et Makamba. La consoltation va être lancée pour les études de faisabilité et d'exécution. Le financement prévu est de 35 millions de Francs Belges. Province de Cankuzo. Le démarrage des travaux commence à la fin du 2o semestre avec financement italien; Province de Rutana. Les travaux de 17 réseaux ( et de 4 réseaux complémentaires en province de Cankuzo), seront lancés en 1992 dans le cadre du Vllo FED; Région naturelle de Mugamba. Les études d'exécution des réseaux sont en cours. Le programme couvre 3 provinces et 12 communes et le financement disponible est de 1,5 million écus; Province de Kirundo. Accord de principe pour un programme de couverture totale à lancer dans le cadre du VlIo FED. UNICEF: Projet Eau et Assainissement (PEA). Aménagement de sources sur l'ensemble du pays, et d'adductions pour desservir les centres de santé et les écoles dans les provinces de Bubanza, Makamba, Cibitoke et Muramvya. ONG: Des ONG interviennent dans le sous-secteur de l'alimentation en milieu nual. 24. Tous ces programmes devraient permettre de porter le taux de desserte des populations rurales entre 7% et 8% en 1997, sur une population rurale qui sera passée de 5,3 millions en 199 à environ 5,9 millions. D'autres programmes à venir permettront d'augmenter ce taux de desserte.

40 Annex Page 5 of 6 Én milieu Md" 25. Au cours de la même période plusieurs progmmes de réhabilitation et d'extension de réseaux de distribution d'eau à Bujumbura et dans les centres secondaires urbains seront réalisds avec les financements de diff6rents baifeurs de fonds: Villes de Kirundo, Muyinga et Rumonge. Travaux d'extension des réseaux de distribution d'eau dans ces trois communes Début des travaux prévu ri Io semestre 1991 pour un montant de 5,6 miuiond de DM; Villes de Ruyigi, Karuzi, Buhiga, Mabanda et trois quartiers autour de Bujumbua. Programme de renforcement et d'extension des systomes d'alimentation en eau. Lancement des études de faisabilité en Mars Financement affecté à l'étude 5. DM; Villes de Bururi, Cibitoke et Makamba. Programme d'amélioration de l'alimentation en eau potable. La consultation pour l'étude de faisabilité sea lancée avant la fin de l'année CCCE Réhabilitation de l'ancien réseau du centre de la ville de Bujumbura. La définition de l'opération sera effectuée au cours de l'année Tous ces programmmes devraient permettre de poner le taux de desserte de la population urbaine à 98 %, en am6f rant en m8me temps les conditions de service offertes aux populations déjà bén flciaires des réseaux. Reue Annuelle du ProYmme Sectoriel d'investissenent 27. Le programme d'investissement du secteur de l'eau et de l'assainissement sera revu chaque année dans le cadre de l'examen global des investissements de l'etat, en vue d'assurer que 'Ous les investissements du secteur s'insrent bien dans le Programme d'investissements Publics (PIP). Coordination du Seteu 28. Pour assurer une bonne coordination du secteur, la Commission Nationale de l'eau et de l'energie organisera chaque année, à date fxe, une table ronde des bailleurs de fonds int6ress8 par le secteur. Cette table ronde r6unira en priorit les financiers et cofinanciers des projets en cours, en vue de leur supervision, mais sera ouverte aux autres bailleurs de fonds potentiels. D. PLAN D'ACTION 29. Pour mettre en place la pol que sectorielle définie ci-dessus, le Gouvernement a déjà pris les mesures suivantes: (1) Décembre 199. Préparation, signature et diffusion aux autorités provinciales et communales d'une Note d'instructions fixant les modalit6s d'organisation et de gestion de l'approvisionnement en eau en milieu nural; (2) Janvier Cr6ation des premiers Comitds Communaux d'usagers, selon les dispositions arrêtées dans la Note d'instructiorns; (3) F6vrier Discssion du projet de Lettre de Politique Sectorielle au niveau de la Sous-comission Nationale de l'eau;

41 (4) Mai Signature de la présente Lettre de Politique Sectorielle. Annex Page 6 of 6 3. Pour continuer la mise en place de ladite politique le Gouvemnement prendra lec mesures ci-après: (1) Juin 1991 LIncement d'une étude tarifaire pour les tarifs REGIDESO; (2) Juin 1991 Signature et diffusion aux autorités concernées d'une Note d'instructions fixant les modalités de gestion des bornes fontaines publiques en milieu urbain; (3) Novembre 1991 Organisation et tenue d'une conférence des Bailleurs de Fonds intéressés par le secteur; (4) Déoembre 1991 Augmentation après étude des tarifs d'eau pratiqués actuellement par la REGIDESO, pour les abonnés dont la consommation est supérieure à vingt m3 par bimestre; (5) Mars 1992 Après une campagne intense de sensibilisation de la populaton, mnis en place par la REGIDESO d'un programme de coupures sytématiques de l'eau pour les abonnés en retard de paiement de plus de trois mois; (6) Juin 1992 Trnsfert au cas par cas par la REGIDESO aux communes concernées des adductions d'eau des centres non compris dans les 23 centres définis par le décret No. 1/13 du 11 Mars 1986; (7) Juillet 1992 Examen avec la Banque Mondiale d'une proposition de nouvelle grille de tarification de l'eau de la REGIDESO et de son échéancier d'application; (8) Septembre 1992 Proposition d'un programmme d'assinissement pour le milieu urbain et le milieu rural: organistion institutionnelle, répartition des secteurs, développement des progammes; (9) Septembre 1992-Septembre 1995 Mise en oeuvre progressive de la nouvelle grille tarifaire pour la REGIDESO; (1) Décembre 1993 Promulgation d'un décret reprenant les dispositions des Notes d'instructions (milieu urbain et milieu rura), améliorées par l'expéience acquise après plusieurs années de mise en oeuvre, et fixation définitive des responsabilités de DGHER et REGIDESO;

42 D I ""TER SPPLY SECTOR PRNOECT AFURICA ItE61U Vater _ y *nd Ssnittion Basic Indicators (19E7 No Country Population Density GNP per Water Access Sanitation access Infant Life Cop. Urban Rural Urban Rurat Mort. Expect. (million) Pop/R2 USS X z X X (per /) (yeors> 1 enin Botsw.m Burkina Fso Burundi S Cote d'ivoire Ethiopia n.a uadagascar Niger Rwanda Sengat Ugandb Zai,i Ib

43 URTER SPPLY SECToR PROJECT Norbidity ad Nortatlity Rates (198 to 1988> T M T M T M t M T M T M T M T M T N Chotera Typhus Hepatitis Typhoid Fever Amoebtasis Dlarrhoea Poti fcelitis Nalaria Sitharziosis Sources: Ninistry of heatth (Statistics of the Department of Epidemiotogy) T: Morbidîty M: Mortatity Ix

44 BTER SUPPILY SECTR PUoJECT Prement Sittstlon in the Rmtra Sub-Sector (1969> Provinre Superficy Iater Length Standptpes House Protected Velts Rurol Poputation Population Level of Systema of pipes Connections Springs Population Density Served Service (Ibc2 (No) (km) (No) (No) (<o) (No> <K> 1 suj-u ra , , X 2 Subeam , , % 3 Bururi , , X 4 Cankueo , , X 5 Cibitoke , , S 6 Gitega , , X 7 Karuzi , , X 8 Kayonza , , X 9 Kirundo , , X 1 akaob il , , X Il Murvya , , X 12 uyinga , , X 13 mgozi , , K 14 Rutana , , X 15 Ruyigi , , X Total ,91.15 U.7X >4

45 tri I I - O n -b N < Q g g- X -~~~~~~~~~ i t#y4ætoocn " fçr N~~~~ - 4 t:n''^; ><é:" Sa >X N 8 g R82 l 9 l s g~~~~~~~~~. t ~ 1 g < e t- d- *dnwt-oc~ doin;4nt "~o. ~ gvi e 3- g-, Z ^ 1 ] 1isZ S}la a X 2.4'

46 Annex Page 2 of 4 2. Provinces of N-azi and Muyinga (KfW financing) 2. For these provinces the principal characteristics of the systemas are smumarized in the following table: CQm Syste. Aqueduct Distribution Tanks Standpipes Conections (km> Proince of Nuozi Tanpra Boib Nmba Bhanda w.uma Cahi Igozi CigatiJe e tn Nyarenz/Mraaranara Gikomro Kiraja Ktbuay Ngozl Nivo Narmnuars Rubaya Ruhororo Ruhororo Province of awir. Gashoho Gashoho Gasorwe Karama Muakiro Kiyanza Butihinda/Gateranyi hugano Buhinyusat/uynga ikroyoyo Provinces of Gitega and Muamnvya (IDA FinancinQà 3. In these provinces the project would finance: (a) Feasibily study to select water supply systems to be implemented. The selewtion would be based on the investment cost per capita and on capacity of the population to cover operation, maintenance and real costs for the system; - () Final design for selected systems; (c) Pipe supply and construction of systems (for about 25 km of pipes) and supervision of works. 4. Provinces of Cibitoke. Bubanza and Makamba (AGCD FinEicing) 4. In these provinces the project would finance on the same biais for selection of the systems: (a) Feusibily study to select water sply systems and final design for selected systems; (b) Pipe supply and constcion of syrstens (for about 25 km of pipes) and supervision of works. B. IZROELMflQN AND DEVELOPMENT OF SPRINGS S. Tii project includes the protection and development of 3, Springs. These works will be carried out by UNICEF and NGOs, and include a program of sensitization for the populdion and on-the-job training for communal attendants in charge of maintenance of these springs. C. INSTI ITUTIDOKD.WIL 6. Thi puwpose of this component is to consolidate the services provided by Institutions operating in the sub-soctor and puticularly tihe DHER, the Project Unit, tie Communes and the communal water utilities. 1. Proiect Unit (PAEMR) 7. lth PABMR would assume the sane responsibilities as in the Rural Water Supply Project (Cr BU) u ther tiaudtority of DGIER. The project would finance all the personnel, equipment, operating aid tiang expmnses of tih PAEMR operations.

47 Annex Page 3 of 4 8. The composition of the PAEMR team including technical assistance would be: Position o urat Finaroinoe Coordination Unit.ProJect Director 72 m..coordinator advisor 1 TA ta 6. IDA.Accountant 1 72 m..administrative Agent 1 72 M..Secretary 1 72 m..driver 1 72 M. Maintenance Assistance Unit.Maintenance engineer 1 TA /a 6 m. ACCO.Counterpart 1 72 m..water engineer 5 72 M. Accounting Control Unit.Accountant 4 48 m. Sonsitization and animation Unit.Community development expert 1 TA ta 36 m. IDA.Coumterpart 1 48 m..sensitization term 8 48 m. et: Technicat assistant. 9. The Project includes acquisition of light vehicles (13), micro-computers (4) and supply of office equipment. 1. The training env.saged comprises the following: (a) Training abroad for tie Project Director (2 mtonhs) and the maintenance engineer counterpart (6 months) to cover respectively tie following aspects: Project management and maintenance of water supply systems; and (b) Local training for accountants (4x2 months) to cover receipts and expenditures, billing and collection, and auditing; local training for maintenance engineers (5x2 months) to cover operation and naintenance of water systems (Collection, treatment, storage and distribution). 2. WHER il. 'Me proposed actions are intended to increase the efficiency of the DOHER in providing equipment, appropriate technical assistance and training. The Project includes: (a) Supply of light vehicles (5), micro-computer equipment (2) and topographic equipment; (b) Civil engineer (4 years) provided by AGCD to the force account works Division of DHA; (c) Training abroad for technical high level staff (5 months) to cover the following aspects: Planning of works by objectives, financial management of projects and management of water resoures and of water supply systems; trsining abroad for the administratve and financial director (6 months) to cover budgeting, inventory magement, accountng md financial management; training on-the-job for 3 water engineers with consultants in charge of feasibility mad final design studies; ad (d) Sector organization study to define responsibilities betwea tihe various projects ad procedures to be followed by the different agencies involved (8 months). 12. The project would include: 3. Comnmunes and Communal Water Supply Utilities (a) annual information and exchange of view seminars for communal administraors and, chairmen and t_usr of user's association; and (b) local training on operation and maintenance of water supply systems for about 1 communal tendants (138 months); local training mad sensitization on management of the systems for about 6 chairme antd teasur of user's association (4 months).

48 Annex 5-4- Page 4 of 4 4. RUGIDIES 13. Two sis (TORs il Animx 14) would bo cunried uader the project: (a) Updang of the ubn waoe tauiffs (6 months); mmd (b) Water supply master pla for Bujumbur (2 montbs).

49 l.ugozi, Nuytnga.Final déstn Cr 1625U... -UI AiTER UWPLY SECTU ftoje lq>pntatioen Schedate Financfm :C? wrks 'ffmentsupptykfm Kfw 4.. O oooo n * ^* 2.KanzWM,arz 2.ndes Cr 1625U... Ec CvIl oks IDA ooooooo_**** 3. Giteg I i ty studya IDA-PPF......Finsl deslgi..... IDA _o oow -* 4.Cibi oke Bubenza Makamia.Feasibîtty studyagcd F,nal deslgn AGCD. 6.Springs develo.ent IDA * ***** 7.Coordînation (PAENR).Technical assistoeio AG6/IDA..Sensitîzation IDA.Trainne IDA Studies, audlits IDA... B.Strenhthenin of DO6ER AGCD/IDA RE61DES9 Studies.Tarlff study ~ IDA-PPF Bujuzb. Master Plan IDA Supervision A=CD/IDA"Kfw mumuuuumummu U=uuomuc=zmmn su3 _= _3 +++*4+ sidding process; osooso Equipmmnt supply; - Civil works; Studies, Technicol assistance Training; - Supervision. S= X

50 UATER SUPPLY SECTOR PROWECT PROVICES OF KATAIZA * KAbUZI Detailed Cost Estiate (Fgu *iltion) Syste Forelgn Local 1997 Foreign Local Totat Foreign Local Foreign Local Foreign Local Foreign Local Foreign Local Foreign Local Foreign Local Total Provînce PrBwirm of f ram Kauu : : Giise ls S 3 ssare Mwultru Rerera Sbcgue Iuh nga a R1xaigu Rano Rusezi Il 1.9 Kabarore Canpazi Ruwv o Nikani Gatara N Gatara S Butaganzwa Rubirizi Province of karuzi 19 KG!gange Oaro ugenyuzi Cantzikiro Rusaza ZUb-2o Bi6a'Gr-a Gasera Z7auweisa ' 28 raba Gitang Sub total Final Design ~a Supervision Physical Continsencles Pr ce Contingpncles g Total %a Financed under Second Rural Vater Supply Project (Credit 1625-BU) Price value of June 199. Breakdob erjatmpry (F8u dtlien) Category Foreign Local Total Foreign Local Foreign Local Foreign Local Foreign Local Foreign Local Foreign tocal Foreign Locel Foreign Local Total Eguipment Supply Civit vorks finat Oesign \ao Supervision Sub (D total C x Physical Contingencies o Price Contingenles > Total ' \a Financed under Second Rural Vater Supply Project (Credit 1625-BU) Price value of June 199.

51 MATER SPPLY SECTOR PROJECT IhSTITUTIOl BUILDING Detailed Cost Estiîate (FBu aillion) Forelgn Total Local Foreign Local Foreign Local Foreign Local Foreign Local Foreign Local Foreign Local Foreign Local Foreign Local Total à. ProJect unit (PAM) 1 Direction PAEH Persoeml TechnicaL 4.5 assistonce Equip.mnt Tr inina Ceratin.6 expoenses Studies/audit Nuintenm%e 5.8 AissistUE 37. I Unit Persomel lecrhnical 7. assistu 7. o Equipeent Training Operatirg xpe-s s Acountit 6.7 Centrrl unit Personnl Equipcent Training Operating.6 expenses Sensitization 2.5 Unit Persomnel Technical 7.2 assistance Equipment Operating expenses; _Sub-t_ta B. DGEE Technical assistance Equiplent Training Studies ' SuIbtotal c u C. Ccunes *nd Coma.nL VoLter Utilities Training mb-total D. GIE6"SO Studies Tarlff Study PPF Naster Plan for Buju*ur 16.ô 39.3 Subrgtotsl Total PhyIscal contingenies i Price contingencles Price value of June 199. Total Breakdam Catem y (Rh million), d > Total >= Category Foreign Local Foreign Local Foreign Local Foreign Local Foreign Local Forelgn Local Foreign Locel Foreign Local Foreign Local Total CD M Technical assistance N Equipment S. Training operating expenses Studies/audit r. Sub Total Physical contingencies Price contingencies.6 ' S.6 Price value of June 199. Totat

52 MTER 19. SECT P ROEC PRMMINES OF 121. UUIISA GITEGA. BOADVT, CIUITOKE. EU8AZ 519 AMoeAU Detated Cost Estioate (FU mnilion) Foreign 1996 Local Forelgn 1997 Local Foreign Local Total Foreign Local Foreign Local Foreign Local Foreign Local Foreign Local Foreign Local Total 6. mlqlr u. E if% = t Suçy upe Wi rb* Superviuion Sub totnl it Cit Md i st u1 Fineal d swgn Adductions E ig 1., jay 225.,C, Wi ~~~~~~~~~~184.1 trubf Sçervision Su total c CibltaÊne Mmu.mi U.k*A" Feasibilhty 4 Finml design Adàrttlon Equint Supply.Clvi Uorka Supervision Sub total & Equipesmn Civit Uors Sub total Plhsical continhncies Price contingicles Price value of Jung 199 laau l S _reun by Category (Fou lion> Forelgn 1997 local Foreign Total Local Foreign Local Forelgn Local Forelgn Local Forelgn Local Foreign Local Foreign Locel Foreign Local total Civil works Equlpeent S Consulttin sericees >D U41.( Sub total Fo S37.4 X Phvsical contingmncles o v Price contingencles Price value of 5 june 199 Total U '

53 WITR swply SECTR PROIECT Ota iled Cest Ectiete Bre.kda.m by lear ad bly Coqponnt ae Coït (FDu illion) Foreign 1995 Loeal Foreign 1996 Local Foreign 1997 Local Foreign Total Local Foreign Local Foreign Local Foreign Local Foreign Locul Foreign Locat Total A. RMURIL IBTEN ULN? SSI Provinces of: Prgoin of: Kruui cn Kayana te9a ai twya Ci%oe~az inka" feaslbtt ti &final design studies S22ervlsion n Sut-totat a. W83GSS C. IUSTIMIUIL UtuDIUB 1 Project Uhit (PA M ) Coordination Unit Naintenance Assistance 14.8 anit , Acco mtiq control unit ô Sensitization Unit DGH R Couut mater utilities REGIDE9D Updatin8 tariff study PPF Water Supply *ter plan Sub--totat efinmmcs of FPF o1l Phfsical ContfawencIes.5 Price 95.8 Continglences Price value of Ja 199. lot n reatdaai bi bc le r*d Sasm Cnt <Nlu Million> tgory Total Foreign Local Foreign Local Foreign Local Foreign Local Foreign Local Foreign Local Foreign tocal Foreign Local Foreign Local Total Esliemnt, Pipes Cvf IbMrks Technical Assistane Training Operating Expenses S2.tî Consultine Services *g Refinancing of PF ID Si*.total &x Physical Contie-pncles a Price Contingencles b Price value of ârm 199. Total S

54 ATER SUPPLY SECTOR PROJECT Caracteristice of the Syste Length of Standpipes Standpipes Population (199) lnvestment (value June 199) Pipes Per Km Per Total Per Km Per irnab. NO. Ccmue Vater System (m) (No) (No) Served Per Km Standpipe (FBu"illioen) (FBuJC) (USS) C11tOE OF KYAUTZA t Matonwo BSisasue 6, , Matongo Gitwe 13, , Natongo 6asare 12, , Nuruta unanira 4, S Muruta Remera 8, , Nijanga mboge 11, , Njanga WMhanga , Ranso Rtbungu 6, , Rango Rango , Kabarore Rugazi 12, , Il Kabarore Kabarore 3, , Kayanza/Nuruta Campazi 19, , Kayenea/Nuruta Ruvomo 13, , Cahoeno Mikoni 6, , GataraI/ahonbo 6atara Nord 48, , Catara/Natoabo 6atara Sud 57,4 ) , ' Butaganzwa Butaganzwa 12, , Butaganzwa/Rfago Rubirizi 33, , Sub totat 294, , , PRMwiE OF KAMRI 19 Shombo Klyange 2, , Shombo Gaharo 7, , Bugenyuzi Buenyuzf 22, , Bugenytuzl Canzikiro 9, , Gihogazi Ruzamaza 13, , Gihogazi Nugogo 8, , Mutuba Bibora 11, , Nutuda Gssera 3, , Nyabikere Rugwiza 11, , Nyabikere Taba 21, , Bhiga Gitanga 11, , Sub total 123, , X x Total 418, , , Co

55 tlter SUPPY SECTOR FRo.ECT Projected tariff and anuat fee level AmusaL Fee tvalte 199) (1) (2) Operation ConsUmDtion (ml3 rer day) m3 Renewal Renewal X of Starting Private Public Price 2.5%iyear.5liyear increastng Averoap go. CamaWi Water System Year Stavxpipe Connection Connection Total (FBu) (FBu) (Fou) (US1) Income at PRa«"CE OF IrAAV 1 Natongo Swisange , X 2 Natongo Gitwe , X 3 Ratango Gasare , X 4 Muruta wunanfra , X 5 Nuruta Remera , X 6 Ndanga Mbogwe , X 7 uhanga "âmeana , X 8 Rango Rubunsu , Rango Rango , X 1 Kabarore Rugazi , X 11 Kabarore Kabarore , X 12 Kayanza/Muruta Caspazi , X 13 Kayanzae/uruta Ruvomo , X 14 Gahombo Nikont , X 15 Gatara/Gahombo Gatara Nord , Gatarf/Natombo Gatara Sud , X 17 Butaganzwa Butaganzwa , X 18 Butaganzwa/tRango Rubirizi , X Sub total , X PRCiOE OF KARUI 19 Shoubo Kiyange , X 2 Shohbo Gaharo , X 21 Buenyuzi Busenyuzi ,23 2, Bugenyuui Canzikiro , Gihogazi Ruzanaza , X 24 Gihogazi Nugogo , Nutumba Bibara , X 26 Nutuba Gasera , Nyabikere Rugwiza , X 28 Nyabikere Taba , X 29 Siuhiga Citanga ,11 1, X Sub total , X Total , X a/ Average armual cash ;ncome in rural areas is estimated to FBu 35,.

56 Annex Page 1 of 6 WTMi SUPPLY SECoIe PRC.ECT CounâL luter Utilitie. Inco Stutemft Revenue *WVter sales (Priv. connect.) Voter sales CStarcidppes) U Total Revenues Expenses (Cash and non cash).personnel Operating costs Others and services Renewal charges Total Expenses Net Incoae aitue Revenues.Vater sales (Priv. cormect.) Vater sales (Standpipes) Total Revenues Expenses (Cash and non cash).personnel Operating costs Others and services Renewal charges Total Expenses Met Inc me Besace Revenues.Water sales (Priv. comect.) Vater sales (Standptpes) Total Revenues Expenses <Cash and non cash).personnel C Operating costs Others&nd services Rumewal charges Total Expenses Net Incame Revenue.Vater sales <Priv. connect.) Uater sales (Standpipes) Total Revenues Expenses (Cash and non cash).personnel :Operating costs Others and services Renewal charges Total Expenses Met Incar SuRem»e Revenues.ater sales tpriv. coemect.) Vater sales <Standp4pes) Total Revenues Expenses (Cash and non cash).personnel Operating costs Others and services Renewal charges Total Expenses det Incae

57 Annex Page 2 of 6 Comune l "ter UtilItf e Incm Stmtmntu <FDsiOOO> abogwe Revenues.Water sales (Priv. connect.) uater sales (Standp, pes) Total Revemues Expenses (Cash and non cash).personnel OperatIng costs Others ard services Renewal charges Total Expenses Net Incoe iiuafl Revenues.Water sales <PrIv. comect.) Uater sales (Standpipes) Total Revenues Expenses (Cash and non cash).personnel Operating costs Others and services Renewal charges Total Expenses Net Incne Revenues.Water sales (PrIv. connect.> ,Water sales (Stanefipes> Total Revenues Expenses (Cash nd non cash).persomnel Operating costs Others nd services Renewal charges Total Expenses Net Incoae RUUS Revenues.Water sales (Priv. connect.) Water sales (Stan4,ipes) Total Revenues Expenses (Cash and non cash).personnell Operat1ng costs Others and services Renewal charges Total Expenses Net Incoae ami Revenues.Uater sales (Priv. connect.) later sales (Standpipes) Total Revenues Expenses (Cash and non cash).personnel Operating costs Others omd services Renewal charges Total Expenses Net Inconm

58 Annex 1-5- Page 3 of 6 Coul Uhter Utilities neo Stateoits (lw> il Revenues.Uater sales (Priv. conrect.> Water sates (Stanciipes) Total Revenues Expenses (Cash and non cash).personnel Operating costs O Others and services Renewal charges Total Expenses O Net Ircome Cup i Revenues.Vater sales (Priv. comect.) O O Water sales (Stancdipes) Total Revenues Expenses (Cash ar non cash).personnel O Operating costs Others ard services O Reneuat charges Total Expenses O Net Income O RuvomO Revenues.Water sales (Priv. correct.) O Water sales (Standpipes) Total Revenues O Expenses (Cash and non cash).personnel Operating costs O _.Others and services Reneial charges O Total Expenses Net Income O Nikoni Revenues.Water sales (Priv. conneet.) Water sales (Standpipes) Total Revenues O Expenses (Cash and non cash).personnel Operatirn costs O Others and services O Renewal charges total Expenses Net Income Gataral Revenues.Water sales (Priv. connect.) O Water sales (Standpipes) Total Revenues O Z Expenses (Cash and non cash).personnet Operatlng coati Others snd services Renewat charges Total Expenses O Net Income

59 Annex Page 4 of 6 Ccanut Mater UtititIes Incoee Statemfts <FBWOOO) Gâtera S Revenues.Water sales (Priv. comect.) Water sales (Stan*dppes) Total Revenues Expenses (Cash and non cash).personnel O Operating coste Others and services Reneual charges Total Expenses Met Income Eutsagwnm Revenues.Water sales (Priv. connect.) Water sales (Stancdpipes) Total Revenues Expenses <Cash and non cash).persoeel Operating costs Others and services i Renewal charges Total Expenses Net Income Ru>iri Revenues.Mater sales (Priv. comnect.) Water sales (Standpipes) Total Revenues Expenses (Cash and non cash).personnel operating costs Others and services Renewat charges Total Expenses Net Income Kiwae Revenues.Water sales (Priv. cornect.) Mater sales (Standpipes) Total Revenues Expenses (Cash and non cash).personnel Operating costs Others and services Reneual charges Total Expenses Net Income OGah,ro Revenues.Water sales (Priv. comect.) Water sales (Standpipes) Total Revenues Expenses (Cash and non cash).personnoel Operating coste Others and services Renmal charges Total Expenses Net Incoeo

60 Annex Page 5 of 6 Ccaut hter Utititie Inco St teents Uuu'vuz Revenues.Uater mates (Priv. connect.) Uater sales (StancHipes) Total Revenues Expenses (Cash and non cash).personnet O Operating costs Others and services Renetal charçs Total Expenses Met Income Cumikiro Revenues.Water saies (Priv. comect.) U ter smaes (Standpipes) Total Revenues Expenses (Cash and non cash).personnel Operatlng costs Others and services Renewal charges Total Expenes Net Inco e Riu.a Revenues.Uater sates (Priv. comnect.) UWater saies (Stawb*fpes) Total Revenues ExPenses (Cash and non cash) -Persomel Operating costs Others and services Renewal charges Total Expenses Net Incore u Revenues.Vater sates (Priv. connect.) Uater maies (Stanctfpes) Total Revenues Expenses (Cash and non cash).personnel Operating costs Others and services Renewat charges Total Expenses Net Incone libwn Revenues.Uater maies (Priv. comect.) Water maies (Standpipes) Total Revenues Expenses (Cash and non cash).personnel Operating costs O U Others and services Renal charges Total Expenses O Met Incan

61 Annex Page 6 of 6 Ce une 1 "ter Utitl ff Income Stetemat (FOWOOO ZS lra Revenues.Vêter sales (Priv. connect.) Vêter ales (Stanc4ipes) r 15 Total Revenues Expenses (Cash and non cash).personnel operatine costs others and services f Renewal charges Total Expenses Net Income ais" Revenues.Vater sales (Priv. comnect.) Vater sales IStan ipes) O Total Revenues Expenses (Cash aid non cash).persornel O Operating costs c others and services Renewal charges Total Expenses Net Incarne O Tb Revenues.Vater sales (Priv. cmonect.) Vater sales (Stan41ipes) Total Revenues Expenses (Cash and non cash).personnel o Operating coste Others aid services Reneial charges Total Expenses Net Incarne Bitarua Revenues.Vater sales (Priv. connect.) Vlater sales (Standipes) Total Revenues Expenses (Cash and non cash).persornel Operating costs Others and services Reneoal charges Total Expenses Net Incare

62 mm ' nu'y SECTOR PRO-M tbatiss IEVEB Incoo Sttefnt <Fiu Niltion) ---ACTUIL/AUDITED-ESTINATED -*-*---* * PROJECTED Total Electricity * Mater Revems ,837 2,347 2,658 3,237 3,94 4,2 4,744 5,234 5,79 6, ,7 2.Government Sahsidf O.Sales of Works< Electricity e Vater) a O O.Sales ros Lease (Etectrtcity Mater) O O O O O O O O.Internal lorks Other (Finacblat Rewns) Totat Oaeratimu Revweres ,91 3,19 3,477 4,19 4,745 5,144 5,633 6,148 6,736 7,371 8,69 8,835 EN'S.Consuad 6oods and Services M88.Other Expenses and tosses Salaries JTaxes xecistion ,376 i,46 1,62 1,89 1,887 1,899 2,58 2, ,124 2,23,Povsion G 212 O O O O O O O O O O O Exchawle Losses 2, il ,446 1, ,849 2,849 un.sinetac > Total Expenses 4,279 5, ,944 3,15 3,283 3, , ,942 Profit & toss Before Interest (2 295) <2 311) ,462 1,738 2,155 1,27 1, ,279 1,893 Interest -861> -923' (1,53> <1,154) (1.158) "1.185) (1.191) (1.43) (1.668) (1.656) <1,6643) C1.3>) <1618) Profit & Loss After Interest (3 156) (3,234) (883) (622) (243) (641) (116) <938) (351) 275 Exception. Lo3ses Z25) (69) <69) (69) (69) (69) (69) (69) (69) (69) (69) t69) <69) luet Profit & Loss of lear (3,361) (3 33) (952) (691) (312) (71) (185) (1,7) (42) 26 Cumulated Profit & Loos (2.872) (6,233) (9,536) (1,487) (11,178) (11,49) (11,282) (1,84) (1,148) (1,858) (11.43) (12,5) (12,47) Met Profit & Loss (6,233> <9,536 (1,487) <11,178> <11.49> <11,282> <1,84> <1,1481 (1,858>(11,43>) 12,5>) 12.47) <12.264) Average of Met Flxed Assets in Service ,239 18,21 18,765 2,12 2, ,839 18,243 16,272 14, Rate of Return on F1xed Assets -12.3x X 2.9X 4.9X 7.3X % 5.4X 8.4X X 13.9x Debt Service Cowerpe (1.4) l1.1) 1.Z Operating Ratio Capital Investtnt fr.:,.energy Sector Reabilitation Credit Yater Supply Sector Credit and KfiW grant :3 _ x B-

63 IM1ER SIPPLI SECTOR PROJECT REGIDE9 Balence Sheets (FBu Miltion) SETS Ffxed Assets ---ACTUAL/AiDITED-ESTINATEO PROJECTED Fixed Assets in Service 21,825 22,46 23,686.Less: 25,225 Accumàlated 27,899 Depreciation 31,148 32,495 32,74 (3,23) 35,439 <4,146) 35,638 (5,522) 35,638 t6,987) (8.67) 37,922 (1,416) (12,33)... (14,23)... (16,261)... (18,331> (2,41>... (22,525) (24,727> Jet Fixed..... ssets... in Operation 18,622 18,314 18,164.Other 18,238 Assets 19,291 2,732 2,192 18, , , , Iork in Progress 1, ,539 1,226 1,96 4,617 1,944 6,5 1,983 4,169 2,23 1,347 2,63 ~~~~~~~. 29 2, , , otal Met Fixed Assets 19,465 2,445 23,7 25,229 24,42 23,559 21,91 22,415 21,283 19,252 18,148 17,42 17,283 Current ssetts.cash and Banks 855 1,463.Capitalixed 1, , , ,339 2,375 2,612 2,874.Consumer«Exp es 4,95 7,783 7,783 7,783 Rece,vables 7,783 7,783 7, ,212 7,783 1,173 7, Governmt Receinvbles , , , ,461.Other Receivablts o Inventories , , , , , , , , Total Current Assets 8,27 12,111 11,822 1,134 1,186 12,92 11,264 11,78 12,37 13,85 13,27 13,672 14,115 EUIKTT l Total Assets 27,492 32,556 35,527 35,364 34,66 35,651 33,174 34,195 33,59 32,337 31,418 31,92 31,398 LIAIlLITIES.încedsein Capitat , ,982 aincreasein 4,982 Capital , , ,982 1, ,982.Goverrunt Contribution to 1,641 Capital 1, ,641 1, , , ,41 1,641 1,641.Earnings of the Tear 1,41 1,41 (3,361) 1 41 <3,33) ) 1 41 (691) ) 1,41.metained Earnings (Accatlted 28 Losses) 478 (2,872> 656 <6,233) (71) (9,536) (185> (17) (1,487) (11,178) (42) 26.RevaLuation Reserve (11,49) (11,282> (1,84> (1,148> <1,858> (11,43> (12,5) (12,47) Total Equity (l,251) (2,913) 6,545 5,855 5,542 5,751 6, ,174 5,989 4,983 4,563 4,769 Equ.ipent Subsidy o O Long-Ter Debt 15,981 16,821 1,49 1,57 11,124 11,423 13,881 15,13 14,762 14,231 14,231 14,231 14,231 Less: Current Portion s86 Met Lon-Trer Oebt 15,748 16,57 1,138 1, ,512 14,74 14,331 13,765 13,728 13,668 13,645 Provision for Lasses 5,38 7,868 7,868 7,868 7,868 7,868 5,38 5,38 5,38 5,38 5,38 5,38 5,38 Current Liabilities Current Portion of L.T. Debt Accaounts 233 Payable , ,75 2, , , , Latent Exchlang Lasss ,763 7l763 2, ,129 7,763 2, ,311 4,95 2,411 4, Total Current Liabilities 7,572 1,165 1,11 1,498 1,118 1,951 8,395 7,568 8,47 7,544 7,67 7,84 7,94? x ttoal EmuIty end Ltabilities 27,492 32,556 35,527 35,364 34,66 35,651 33,174 34, ,337 31, ,398 o Current Ratio (timo> 1.1 Debt 1.2 lequity 1.2 ratio 1. /a ( (5.7) Debt /Equity ratio /b 2.2 (12.6) 2.1 (5.7) C. Accounts. Rereivable as Equivalent to nonthu of Salas *Consuiers Covernent a/.efore ev.tuat ion b! After Realuation. Calculated using a revaluation surplus of FBu 25,355.5 million.

64 ete UWPLY SEcM 99OJECT ESim OF RIS Fumh Fta. Stateit (Fhu fuitlt,) --ACTUIAL/WDITED-ESTIMTED - PROJECTED !nteut sourc.uet Inoeo after Tamms (2 295> (2 311> Oepreciation Provision wd 155 Exchuius 1 27 Losses , ,477 1, ,516 4,919 4,1973 Total internmt S.52 Sources 1. 1, ,9 2,561 3,31 3,645 4,77 4,531 5,56 5,624 6, Rorrmfnss.Prropsed IDA Loru.:on-Project ReLated LoB , (6,412) O , , (341) ---. (531) Total... Dorreo1sn 1, (6,412) ,667 1,582 (142) (531) Equlty Imetunts Epu lent 1,641 Sn si 1,41 y 384 a Other Seurr 2,36 1,93 1,29 (56) O (941) O 8 O 351 3,4 O..So ,M... 5, ,37 4,19 4,37 TOTAL sows MEOF FUDS 5S616 6,955 s... 7,439 2,747 2,824 4,827 6,663 8,663 1,661 1,114 8,994 1,442 11,251 1 APLICATII OF F_U CD5pl eximiditures Enegy Sector Rdehilitttion Project Proposed water SLq>iy Sectof 217 Project Inter«t Duriu C truction t 1 O Other C aital Expsndlt , , , , O Other As sts , ,356 Chn,ge in M/orkim Capital 2, ,492 3 (233) 367 (2,76) ,73 4 1,728 4 Intereat Lang-T Debt 861 1, , ,154 1,281 1, ,185 26t 1, Rlepi_nt of Capital , , , , , , uS TOTAL APIJCATIOM OF PIDS 5,162 5,9 5,?26 2,383 2,75 3,591 3,54? 3,599 S,46t 3,64 2,244 3,47 3,9 Workinm Capital 454 1,946 1,713 (364) 68 1,141 2,869 4,212 4,26 5,541 5,61 5,869 6,168 Cash Variation don Govern (18 Consuta (1i 229> Recelv 352 1,242 (923> (3 1343>) (224) overumnt Reeivable t 92 (114) 14 (75) lnreese<o,creasjv Capital Expenditures 2,53 2, Other O (83) 6 Inventories (2) t2) <2> 498 t2) Decrease ln Curr. Liabitittes (1,224> (2,593> t2) 58 (2 (38> t2> 38O 22) (4833> 2,596 (2) > Roauding Oifferences O 5Z6 (479) (1g» 4> ) 2 <13) i QQ ) O O(X TOTALB USEOFKiNlsA&TÀ Detrei1T 2,166 1,492 8eas in t233) brk1xincapptai (2,76) 432 1,73 (2,166) 1,728 1,492) 1, U Î9 2,76 (432) (1,73) (1,728)(1,342) <48) w <1,281) (6) (268) (299) o IQIAL ~~~~ ~~~~ ~~ O 1, ' 4,635 3,12 I ,561 3,122 3, , , ,531 1,397 e Of r et Bs &.6X 2n 72.8X 3.4X 5,56 A6.7 5,624 ln/a N/A 6,934 N/A NIA N/A NIA N/A NIA M*h et REGIDESO' Invnstt Progr_ woutd need to be qpdated fra FY1992.

65 -S7- Annex ll Page 4 of 4 WATER- $UJPPT SEcwtR PROJEC!B~~~g 'pzo Income Stateeant before and after Revalation (1Y au Of Dec«eber 31, 199) (Pau million) Bofore After Revaluation Revaluation a/ Operating Revenues 3,19 3,19 Operating Expenses before Depreciation (1,472) (1,472) Subtotal 1,546 1,546 Depreciation b/ <1,137) (1,376) Operating Income After Depreciation Exchange Losses c/ <2,86) Operating Income (Losses) before Intereet (2,397) 17 Interest (1,53> (1,53) Operating Income after Interest (3,45) (883) Accumulated Losses (9,65) (9,65) Operating Income (Losses) Carried Porward (13,54) (1,487) Average of Net Fix Assets in Service 18,239 18,239 Rate of Return On Fix Asseta -13.1%.9% a/ Estimated Accounts b/ Revaluation Coefficient used is 2.42/ c/ As part of the Proposed Capital Reetructuring Package REGIDESO would not support any exchange loeses from 199 through 1995

66 Annex 1 2 3t~~~s il

67 .59. Annex 13 WATER SUPPLY SC5DR PROTHCT Estimat-d Schmduls of Diuburusaente (Us$ million) Diabursement Standard Bank Fiscal Year during Accumulated Percent Diebureement Semester Ending Semester Diabursement Diebureed Profile PY 92 December 91 June % 11.4% % 4% py 93 December % 11% June % 19% py 94 December 93 June % 51.2% 29% 4% PY 95 December 94 June % 72.4% 53% 63% FY 96 December % 73% June % 82% FY 97 December 96 June % 96.3% 9% 93% PY 98 December 97 June % 1.% 97% 1% Assumption that the Credit is approved by May 1991

68 Annex Page 1 of 4 B-URUD WAM-R SlJPPY SECIOR PROlE:C Update of the Urban Water Tariff Study Tenis of Reference A. CONTEXT 1. The existing REGIDESO's tariffs do not allow the utility to cover operating costs. In addition, te tariff structure is inadequate and penalizes the small consumers. 2. In 1987, an institutional and tariff study financed by ADF, for both the urban and nwal water supply and sewerage sectors was camried out by SOGREAH. Tie recommendations were not implemented, and updating of this study is necessary. 3. The main objective of this updating water rates study is to lay the groundwork for the introduction of new potable water rates, the structure and level of which are to reflect the res! cost of service, while also taldng into accounthe financial capacity of the various income groups. The new rates should also encourage long-tern conservation of water. B. FIR STSlAGE 4. Ihe first phase of the study shall review in detail the current rate structure and its changes over the last ten years acompared with changes in the cost of living. It sh.ll cover the cost per m' of water as well as the charges for lease of meters, maintenance of connections and meters, cost of private connections and simnilar services. 5. The mainly tasks to be performed by the consultant are the following: (a) (b) (c) (d) (e) revaluation of the total fixed assets as of the date of the study, mentioning ail investments to be made over the next ten years; projection of water consumption by user category and monthly volume: leus than In m 3, from 1 to 2 m 3, from 2 to 5 m and more than 5 m; projection year by year of operating costa, based on expected consumption and planned investments. Tie share of unbilled water should steadily decrease from its current level to 2% by the end of the 1- year period; computation of the long-tern marginal cosa per m 3 of water based on the cost of planned expansions and projected operating costs. A 1% discount rale shal b. applied to water costs and volumes; and Using existing studies, drawing up a table of income groups. C. SECOND STAGE 6. The Consultant shall then propose a rate policy designed tn accomplish the following objectives: (a) (b) (c) the lowest income groups should have access to potable water at a cost not exceeding 2% of the household budget; as many households as possible should be able to have private connections, to be achieved by reducing the charge for installation to the actual cosm and spr.ading payment over four years at low interest; prejctwd opemting costs, debt service and capital investment should be fully covered. 7. Romdions shall bo made on the rate structure and the levels to apply by consumption category.

69 Annex PagA 2 of 4 8. Alternatives are to be proposed under which revenue would cover only 2%, 4%, 6% and 8% of capital cot rpectively. Each aternative should be examined for accssibility and for its foreseeable impact on overali consumption. An indexing formula should be proposed whereby rates cm be adjusted each year to refle t price chages. 9. For each dternative, the rate of return on the revdlued fixed amets is to be calculated by dividing net operating tevenue, including provision for depreciation of fixed asets but before payment of debt-service obligations, by the average of revalued net fixed amets for the preceding and current years. D. ORGANlZATION OF THE SIUDY 1. The time allowed for the study is seven months, split into two phaes of three months each. An interim report is to be submitted after the first phase. A final report is to be prepared and discussed with the Authorities at the end of the second phase. Both reports are to be sent in duplicmteto the World Bank. 11. The Water Authority (REGIDESO) will provide the following to asuist the Consultant: (a) a full-time engineer to work in conjunction with him on the stuies and eventually take on the (b) responsibility for regular updating of the study data; a furnished office and secretarial support; (c) access to all available data, existing reports, sstics and annual aocouats.

70 Annex Page 3 of 4 WATER SUPPLY SECTQR PROJECT Water Supply Master Plan for BDuumbura Tenms of Reference A. CONTEXT 1. The 198 Bujumbura Urban Development Master Plan is now out of date. The city has been growing rapidly for several years and a number of expansions have taken place dtat were not envisaged in 198, including: In the North: In the South: In the East: development of the Mutanga i neighboahood (1989-9), the Gasenyi I and II development project, the SIP project to build 1, dwellings, the new squatter settlement in the Gasenyi zone (above the Kamenge Tochnical School) and the creation of the village of Camama. development of the Musaga and Kanyosha neighbothoods (ECOSAT project, over 4, low-income hcusing units) and sizable expansions of the Kinindo neighborhood (over 1, serviced plots). expansion of the city toward the Buhonga hills and the Sororezo neighborhood development project. 2. Ail these sites and services projects for new neighborhoods for which financing has already been secured are additional to the squatter settlements and were not included in the studies for the 198 Master Plan. It is therefore urgent that this new configuration be taken into accouat and that the measures needed to meet the city's future water needs be redefined. B. URBAN GROWTH FORECASTS 3. The consultant will be required to prepare spatial development forecasts for the city by type of housing; the horizons to be considered are the years 2 and The plans envisaged will be based on the prec.iing studies (198 Master Plan), on the studies under way, on recent developmentz and on the trend presently observed. The industrial development programs will also be analyzed and taken into account. 5. The forecasts will he prepared by homogeneous city zone, for which possibilities of expansion and densification will be studied according to the type of housing and its density. C. WATER REOUIREMENT F-RECASIS 6. 'hm forecast of water requirements will be prepared globally for the city as a whole and also broken down at the level of each homogeneous zone for the 2 and 21 horizons. 7. The unit quantities adopted must be realistic and based on consumption statistics gathered by sector andior by sapled consumer groups and the consumnption forecasts will bh broken down by user category (domestic, commercial, industrial, govemment, standpipes, etc.). 8. The consumption forecsts will then be grouped by levels, as determned by technical studies of the distribution system. They will be caculated mn terms of annual averages, daily peals and hourly peaks.