The Burundian economy recovered moderately in 2021 and is expected to strengthen further in 2022, despite the effects of the war in Ukraine. In the medium term, Burundi will continue to grapple with the challenges of balancing priority social, development and COVID-19-related spending with external and debt sustainability; the current account deficit widened in 2021 and is expected to increase further in 2022, due to higher oil prices owing to the crisis in Europe, however mitigated by stronger exports supported by an increase in gold prices. The fiscal deficit is projected to narrow sensibly in the fiscal year 2021/22. Revenue collection would continue to strengthen, boosted by the effects of recent revenue measures, while spending would remain contained.

A team from the International Monetary Fund (IMF) led by Ms. Mame Astou Diouf, Mission Chief for Burundi, conducted virtual discussions from February 24 to March 16, 2022 for the 2022 Article IV Consultation. At the end of the mission, Ms. Diouf issued the following statement:

“IMF staff held productive discussions with the authorities on the recent economic developments, the outlook, and macroeconomic policies in response to the COVID-19 pandemic, the effects of the war in Ukraine, and to maintain Burundi’s macroeconomic stability.

“Real GDP growth increased to 2.4 percent in 2021, driven by a recovery in primary and tertiary sector activities, which benefited from easing social distancing measures and travel restrictions. The agricultural production was supported by improvements in input provision, including timely availability of fertilizers and better-quality crops. The secondary sector experienced weaker growth than in 2020 because of a slowdown in mining activities due to contract renegotiations. The economic recovery should strengthen further with GDP growth projected at 3.6 percent in 2022 driven by all sectors, although slowed down by the war in Ukraine.

“Over the medium term, GDP growth is expected to increase as the effects of COVID-19 wane and ongoing investment projects and reforms start delivering the expected impact. The GDP growth projections are subject to upside potential given the possibly larger effects of the government’s ongoing initiatives and reforms to support the economy’s resilience and potentially larger foreign financing resulting from Burundi’s reengagement with the international community. However, the macroeconomic framework is exposed to downside risks stemming from the uncertainties surrounding the geopolitical situation in Europe, the end of the pandemic, and risks of natural disasters in Burundi.

“Inflation increased to 8.3 percent in 2021 (compared to 7.5 percent in 2020), driven by higher food prices. It could accelerate to 9.2 percent in 2022, driven by rising commodity prices including oil prices, triggered by the crisis in Europe. However, imported inflation could be lower than projected, dampened by prospects of an abundant agricultural crop in 2022 which would reduce food prices, possibly stronger effects of the regulation of strategic product prices, and ongoing import substitution initiatives.

“The fiscal deficit is projected at 4.6 percent in 2021/22 (from 7.9 percent in 2020/21) driven by an improvement in revenue collection, an increase in grants, partly owing to COVID-19 vaccine grants, and a decrease in current spending. Public investment is expected to pick up, marking a recovery after a slowdown due to the pandemic. The fiscal deficit is however expected to widen in 2022/23 driven by a further increase in public investment, offsetting the expected rebound in revenue and grants.

"The current account deficit widened in 2021 owing to both a drop in exports (coffee and mining products) and an increase in imports driven by the needs for intermediate goods and COVID-related imports. External financial flows, including the disbursement under the Rapid Credit Facility and the August 2021 general SDR allocation by the IMF, have boosted Burundi's foreign exchange reserves at end-December 2021 to 2.1 months of prospective imports. Despite an increase in gold exports, the current account deficit is expected to further widen in 2022, due to increasing commodity prices, including oil prices.

“The Bank of the Republic of Burundi (BRB) has implemented since 2019 several measures to support the banking sector, including an increased provision of liquidity and long-term resources. Credit to the private sector was buoyant in 2021, driven by the favorable refinancing terms granted to banks, interest rate subsidy schemes, as well as the creation of new banks (dedicated to housing, the youth, and women). The banking system continues to be broadly resilient with financial stability indicators comfortably above regulatory requirements (except those related to foreign exchange reserves) and non-performing loans at around 4.1 percent in September 2021. However, the number of restructured loans remains non negligible.

“In the medium term, Burundi will continue to grapple with the challenges of balancing priority spending for social safety nets, economic recovery and development, and COVID-19 related spending with external and debt sustainability. Macroeconomic policies will focus in particular on: (i) a prudent fiscal policy, protecting priority and growth-supportive spending; (ii) monetary and financial policies geared towards fostering price and financial sector stability; (iii) a prudent rebalancing of macroeconomic policies to restore external sustainability and boost foreign exchange reserves coverage to more comfortable levels; (iv) alleviating growth bottlenecks through structural reforms to improve competitiveness; and (v) further strengthening governance, mirroring commitments made by the government to ensure the strong governance of COVID-related spending by preparing semi-annual audited reports on these spending, seeking to identify the ultimate beneficiary ownership of companies that will be awarded COVID-related contracts, and publishing audited budget execution reports.

“The mission met with H.E. Dr. Domitien Ndihokubwayo, Minister of Finance, Budget and Economic Planning (MFBPE); Mr. Jean Ciza, Governor of the Bank of the Republic of Burundi (BRB); Mr. Audace Niyonzima, First Vice-Governor of the BRB; Ms. Christine Niragira, 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, non-governmental organizations, and the donor community.

“The mission would like to take this opportunity to thank the Burundian authorities for their cooperation and availability, and fruitful and open discussions.”