IMF staff and Burundian authorities have reached a staff-level agreement on economic policies and reforms to be supported by a new 40-month arrangement under the Extended Credit Facility (ECF) of about US$ 261.7 million. The staff-level agreement is subject to IMF Management approval and consideration by the Executive Board. 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.

An International Monetary Fund (IMF) team led by Ms. Mame Astou Diouf, Mission Chief for Burundi, visited Bujumbura during February 2−12 and held follow-up virtual meetings during February 22−April 6 to discuss with the Burundian authorities IMF support for their macro-economic policies and reform plan.

At the end of the discussions, Ms. Mame Astou Diouf issued the following statement:

“The Burundian authorities and IMF staff team have reached a staff-level agreement on a 40-month arrangement under the Extended Credit Facility (ECF) with access of SDR 200.2 million (or about US$ 261.7 million, representing 130 percent of quota). This is the first Upper Credit Tranche-quality program for Burundi supported by the Fund since 2015. The program aims to support a calibrated macroeconomic policy mix to restore external sustainability, strengthen debt sustainability, while supporting economic recovery from shocks and creating fiscal space for accelerated and inclusive growth. The staff-level agreement is subject to IMF Management approval and consideration by the Executive Board.

“Discussions held with the Burundian authorities covered recent macro-developments, the impact of the various domestic and external shocks faced by Burundi, and Burundi’s macro-policy plans and structural reform agenda.

“Burundi’s economy has been hit by several shocks, halting its recovery from the negative effects of the COVID-19 pandemic and heightening its macroeconomic imbalances. Delayed rainfall in the last quarter of 2022 and limited availability of fertilizer— driven by higher prices in the context of limited foreign exchange (FX) availability for imports, supply disruptions linked to the war in Ukraine, and insufficient domestic production to cover local farmers’ demand— hampered agricultural production. Outbreaks of the rift valley and porcine fevers impacted Burundi’s livestock production. Higher import prices triggered by the war in Ukraine have pushed up inflation, widened the fiscal deficit, and heightened current account (CA) pressures.

“Real GDP Growth is estimated to have slowed down to 1.8 percent in 2022 (from 3.1 percent in 2021) but is projected to rebound to 3.3 percent in 2023. Delayed harvest and lower crop of 2022 will impact agricultural production in 2023 owing to reduced land and seed availability.

“Inflation pressures have not receded. Inflation averaged 18.9 percent in 2022 and has continued accelerating (28.6 percent y/y at end-January 2023), driven by food prices. It is projected to remain high, at around 18 percent in 2023.

“With the support of the ECF arrangement, the Burundian authorities have planned a broad-based near- and medium-term macroeconomic reform agenda aimed at tackling key challenges:

“Resuming pro-growth fiscal consolidation to support debt sustainability while protecting the vulnerable population. The fiscal position is projected to weaken in FY2022/23 (July-June) because of slow revenue collection from measures adopted in the last two budget laws and spending overruns including large fertilizer subsidies. A return to fiscal consolidation is planned starting in FY2023/24, building on strengthened revenue collection efforts and current spending restraint while preserving social spending and efficient investment scaling up under the authorities’ Public Investment Plan (PIP). Public debt will be declining over the medium term under the program.

“External rebalancing and unwinding monetary financing. The central bank (BRB) is committed to recalibrating monetary and external policies to address the below-adequacy FX reserves (1.5 months of imports at end-2022) and large parallel FX market premium. In preparation for the external rebalancing, the BRB has initiated FX market liberalization and reduced financing provision to commercial banks. This will also help curb inflation pressures. Limiting BRB financing to the budget will also be essential.

“Governance and structural reforms will be at the core of the authorities’ medium-term program to ensure a business environment conducive to private-led diversified and inclusive growth and job creation.

“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); Mr. Désiré Musharitse, First Vice-Governor of the 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, non-governmental organizations, and the donor community.

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