- While the Burundian economy continues to recover, economic buoyancy is impeded by shocks and multifaceted challenges, including domestic fuel shortages, low availability of foreign exchange for imports, and persistent inflation pressures. The parallel exchange rate market premium has been widening since May 2023.
- Burundi's reform program aims to support economic recovery from shocks, restore external sustainability, and strengthen debt sustainability, while creating fiscal space for accelerated and inclusive growth.
- Beyond a carefully calibrated macroeconomic policy mix, undertaking growth- and governance-enhancing reforms while being attuned to financial sector vulnerabilities will be essential to address the multi-dimensional challenges.
Bujumbura: An International Monetary Fund (IMF) team led by Ms. Mame Astou Diouf, Mission Chief for Burundi visited Bujumbura during September 25−29, 2023 and held follow-up discussions during October 2−4 with the Burundian authorities on recent developments and progress towards the objectives of the new arrangement under theExtended Credit Facility (ECF). At the end of the visit, Ms. Diouf issued the following statement:
"On July 17, 2023, the Executive Board of the International Monetary Fund (IMF) approved a 38-month arrangement under theExtended Credit Facility (ECF)with access of SDR 200.2 million (or about US$ 261.7 million, representing 130 percent of quota).
"Discussions held during the mission covered recent macroeconomic and policy developments, progress towards reform implementation under the ECF-supported program, and near-term macroeconomic prospects and policy plans.
"Economic growth is expected to slightly accelerate in 2023 (from 1.8 percent in 2022), driven by the secondary and tertiary sectors, as the Burundian economy continues to recover. However, shocks slowed down the recovery. Notably, rain delays and structural challenges at the end of 2022 impacted the first agricultural season of 2023. Commerce and in-country distribution of agricultural products were disrupted by domestic fuel shortages as limited foreign exchange (FX) availability compounded high fuel import prices and supply chain issues. Increases of pump prices in July and September and fuel import volume helped reach cost-recovery pricing and tame shortages. Inflation pressures have continued with average inflation standing at around 29 percent during January−August 2023, driven mainly by food prices, despite easing somewhat during March−July. The beneficial effects of the new agricultural harvest on food prices were outweighed by high import prices owing to the war in Ukraine and domestic factors.
"External sustainability remains a pressing challenge. The current account deficit is projected to remain large (15.6 percent of GDP in 2022).Foreign currency reserves have continued to decline, reaching US$ 59.7 million (about 0.5 month of imports) in mid-September (from 1.3 months of imports at end-March 2023), driven by the import bill and delayed gold sales. Strong remittance inflows and the IMF's first ECF disbursement have provided a cushion.
"The 38-percent nominal ER depreciation operated by the central bank on May 4, 2023 temporarily reduced the parallel ER market premium . However, from about 42 percent on May 4, the parallel ER market premium has widened since (about 57.4 percent in end-September). The financial sector shows resilience.
"With the support of the new ECF arrangement, the Burundian authorities have committed to a broad-based macroeconomic reform agenda aimed at tackling key challenges.
- "Resuming pro-growth fiscal consolidation to support debt sustainability while protecting the vulnerable population. The fiscal deficit is estimated to have widened substantially in FY2022/23 (June−July) compared to FY2021/22 (7 percent of GDP), driven mainly by salaries, subsidies, and accelerated investment scaling up. A return to fiscal consolidation is planned under the program starting in FY2023/24, building on strengthened revenue collection efforts and current spending restraint while preserving social spending and efficient public investment. Public debt is expected to decline over the medium term.
- "External rebalancing and unwinding monetary financing. The central bank (BRB) is committed to recalibrating monetary and external policies to rebuild FX reserve buffers and improve the ER market efficiency. FX market liberalization, tightened monetary policy, and limited financing to the budget will be essential components of the recalibration effort. This will also help curb inflation pressures.
- "Governance and structural reforms will ensure a business environment conducive to private sector-led, job-rich, and inclusive growth.
"The IMF remains committed to supporting the efforts of the Burundian authorities to reduce external imbalances, rein in inflation, preserve debt sustainability, and foster governance and sustainable and inclusive growth.
"The mission met with H.E. Prime Minister Gervais Ndirakobuca; H.E. Audace Niyonzima, Minister of Finance, Budget and Economic Planning (MFBPE); Mr. Dieudonné Murengerantwari, Governor of the Bank of the Republic of Burundi (BRB); Ms. Francine Inarukundo, Permanent Secretary of the MFBPE. The mission also met with other officials of the government and the BRB, as well as representatives of commercial banks, the private sector, civil society, and donors.
"The mission would like to take this opportunity to warmly thank the Burundian authorities for their hospitality and cooperation, and open and productive discussions."
