IMF Staff Concludes 2025 Article IV Mission in Burundi

Washington, DC: An International Monetary Fund (IMF) team led by Alexandre Chailloux visited Burundi on March 17-28 to hold meetings with the Burundian authorities and other counterparts from the public and private sectors for the 2025 Article IV annual consultation. Discussions focused on policies to ensure macroeconomic stability, and the structural reform agenda needed to durably buttress growth, entrench debt sustainability, strengthen financial sector stability, reduce poverty and reinforce resilience to climate-related risks.

Context, Macroeconomic Outlook, and Risks

1. The Burundian economy recorded a slight acceleration of growth in 2024 but continues to face challenges. GDP growth reached 3.5 percent in 2024, against 3.3 percent in 2023. Yet, Burundi's well-identified potential and growth prospects are undermined by macroeconomic instability as well as structural weaknesses. High inflation, pressures on the parallel exchange rate, limited foreign exchange reserves, and protracted fuel shortages continue to weigh on economic activity.
2. Inflation has been increasing since mid-2024. Inflation, which had briefly eased below 15 percent in the first half of 2024 due to tighter monetary policy and lower food prices has rebounded and reached 39 percent on average over the first two months of 2025, amid rapid money supply growth. Prospects for inflation remain concerning. Indeed, continued reliance on monetary financing is expected to sustain high inflationary pressures well into 2027. Controlling inflation should be the authorities' utmost priority, given its impact on the poor and the widespread economic distortions it causes.
3. Growth is expected to decline in 2025 but will recover gradually in the medium term. Limited foreign reserves lead to further fuel restrictions and key imports compression, constraining growth in 2025. Production goods imports are lower, inhibiting secondary and tertiary activities.
4. The current account deficit is expected to narrow in the short term, amid continuing import compression. Burundi's current account deficit improved in 2024 and would continue to improve in 2025. The reduction in the current account deficit is mainly driven by lower imports. Key exports have declined notably due to increased under-invoicing of agricultural exports. In the medium term, higher global coffee and gold prices are expected to boost export revenues. Furthermore, the resumption of mining extraction and the signing of new contracts could raise gold export revenues and foreign exchange reserves, easing import restrictions going forward. The exchange rate premium more than doubled in 2024 but has stabilized earlier this year.
5. Public debt is assessed as sustainable but with high risk of debt distress. The assessment is predicated on the authorities pursuing exchange rate and other reforms. The stock of total public debt stood at about 52 percent of GDP at end 2024. Domestic debt, which accounted for roughly two-thirds of the total, is largely held by the central bank. By 2030, the ratio of total public debt is projected to decline, driven mainly by ample negative real interest rates on domestic debt.
6. The financial system remained resilient in the face of multiple shocks. The core equity ratio stood at 17.1 percent in December 2024, liquid assets represented 19 percent of loans, and liquid assets to total risk-weighted assets stood at 15.4 percent. However, these metrics mask growing risks. Credit growth remained elevated at 27.2 percent, while nonperforming loans (NPLs) rose to 3.8 percent in 2024 from 2.7 percent in 2023.
7. The waning reform momentum in 2024 combined with the more challenging external environment poses significant risks. The expected slowdown in global growth, reductions in official development aid flows, and the resurgence of trade barriers are potential headwinds that could worsen the outlook. A resumption of the 2022-2023 reform momentum, including well-coordinated fiscal and monetary policies and structural reforms designed to support private sector growth, bolster exporting sectors and foreign investment will be key.

Fiscal policy

8. Declining domestic revenues in real terms underscores the need for fiscal consolidation. In the absence of donor budget support, further monetary accommodation of budget deficits risks putting inflation on a spiraling trajectory. While inflation surprise may in the short run help limit deficits (through faster nominal increase in revenues), the decrease in spending in real terms would hurt disproportionately the most vulnerable, whose purchasing power is already diminished.
9. Strengthening domestic revenue mobilization is essential. Staff commends the authorities for initiating digitalization of tax declaration and payments, and deployment of electronic billing machines. Additional reforms are required, including preparation of a taxpayers' register, and an annual review of tax exemptions to limit abuse and ensure they serve the purpose of encouraging investment. Improved transparency in the collection of non-tax revenues —by line ministries and agencies other than the revenue agency— would enhance accountability.
10. A review of tax policy is a priority. Current policy disproportionately impacts the most vulnerable through VAT and excise taxes, while a narrow formal sector bears the burden of corporate and personal income taxes. Generous tax incentives further erode revenues. Transitioning towards a more progressive and growth friendly tax framework, supported by Fund technical assistance, will support the economy and buttress domestic revenue mobilization.
11. Staff welcomes ongoing public financial management (PFM) reforms aimed to improve expenditure efficiency. Payment decentralization and the transition to multi-year program budgeting are underway. Other outstanding PFM reform priorities include reinforcing internal and external audits and improving public investment management.
12. Entrenching public debt sustainability will require vigorous policy actions. These include foreign exchange market liberalization, fiscal consolidation, and monetary tightening. The reforms will boost economic growth, export earnings and fiscal revenues, while supporting increased donor funding. The authorities are urged to pursue cautious debt management, prioritizing grant financing.

Foreign Exchange and Monetary policy

13. The monetary policy framework needs to be modernized. Staff and authorities agreed that the BRB should strengthen its transitional flexible monetary targeting framework while working towards inflation targeting. The underdeveloped financial markets and low access to credit hinder the transmission of interest rate-based monetary policy. The introduction of a new interbank trading platform will likely improve the operational effectiveness of the policy rate. At the same time, the BRB should continue prioritizing M2 as an intermediate target and ensure clearer communication of its 8 percent inflation target to both financial actors and the public.
14. Staff stressed the urgent need for quantitative tightening and safeguarding the BRB's independence to limit fiscal dominance. The ongoing bout of monetary financing is a major driver of inflation and parallel FX rate depreciation. Bringing the growth rate of the monetary base below 20 percent and enforcing the cap on government advances is crucial to controlling inflation. Staff strongly recommended that the BRB increases its policy rate, currently set at 12 percent, to uphold the credibility of its commitment to a tight monetary stance.
15. Staff reiterated that a unified and market-clearing exchange rate remains critical to economic stabilization and escaping the current low-growth, high-inflation trap. The current dual exchange rate regime and high FX premium cause pervasive distortions in the economy. Low FX reserves are conducive to fuel shortages, supply chain disruptions, impede agricultural exports, encourage illegal exports, informality and tax avoidance, undermining foreign direct investments and official aid flows. Reducing these imbalances requires unifying the official and parallel exchange rates, liberalizing the foreign exchange market, and gradually transitioning towards a more flexible exchange rate regime. Along with supportive fiscal and monetary policies and structural reforms, foreign exchange reforms are an important prerequisite for Burundi to realize its economic potential.

Financial sector policies

16. Staff encouraged the BRB to conduct an asset quality review (AQR) to assess banks' loan portfolios. Following the AQR, an evaluation of capital adequacy ratios would be warranted, alongside directing banks to invest in staff capacity building for better credit risk assessment. Finally, the BRB should implement a robust framework for monitoring banks' exposure to government debt, incorporating stress testing for sovereign risk and promoting asset diversification, while considering bank-specific capital charges in case of elevated sovereign risk exposure.
17. The authorities' focus on modernizing payment systems and the digitization of payment was welcomed by Staff. More efficient payment instruments such as mobile payment, QR codes, and better integrated and interoperable payment platforms will help reduce the dominant use of cash in the economy, facilitating financial system deepening and strengthening monetary policy transmission. Expanding the use of payments to and from the government can also help reduce informality, strengthen domestic revenue mobilization through better tax compliance and accelerate the disbursement and targeting of social transfers.

Structural Policies

18. The authorities are encouraged to accelerate the implementation of their ambitious agenda, focusing on structural reforms that address governance gaps, enhance the rule of law, and remove long-standing bottlenecks to productivity. Strengthening the performance of state-owned enterprises, modernizing the coffee sector, and improving trade-related infrastructure will be critical to unlocking Burundi's growth potential. Progress in these areas would support a more open and competitive economy, while also improving institutional quality and narrowing the gap with regional peers across key metrics such as trade openness, investment climate, and government effectiveness. The authorities wish to focus their action on programs allowing import substitution, particularly in the food sector, and increase agricultural exports like coffee, tea, avocados and minerals.
19. The coffee sector, vital to Burundi's economy and showing encouraging signs, faces structural constraints that limit its potential. Staff welcomed the authorities' efforts to sell Burundian coffee at higher prices and to close the gap between export prices and global coffee prices. However, outdated farming practices, limited access to finance and inputs, and underinvestment in processing continue to weigh on productivity. In addition, the exchange premium represents a key challenge to the sector, as exports proceeds' conversion at the official rate disincentivize famers, encouraging smuggling and transfer pricing. Strengthening cooperatives, improving infrastructure, promoting value addition, and ensuring a stable regulatory environment and a larger passthrough of international prices to small coffee growers will be essential to boost export competitiveness and attract investment.
20. Despite its potential and encouraging signs, the country is dealing with challenges in the mining sector. Contracts signed in earlier years did not yield large export revenues. The authorities are aware of the challenges in the mining sector and initiated resolute policies to restructure the sector and ensure an increase in revenue. They have broken non-performing contracts and are working to ensure that the country gets up-front mining payments, instead of waiting for extraction and processing to complete, as was the case in previous years. Improving the governance framework and transparency in the sector, notably by joining the EITI would be critical to fulfil the sector's potential.

The IMF mission team thanks the Burundian authorities and all other interlocutors for the candid discussions and their hospitality.