A stronger economic recovery is projected for 2024, with real GDP expanding by 4.3 percent driven by agricultural production, investment, and reforms; rebounding from the estimated 2.7 percent growth in 2023; Recently-adopted policy adjustment measures, including fiscal consolidation under the revised 2023/24 budget (July—June), monetary policy (MP) tightening, and foreign exchange (FX) market liberalization are expected to support macroeconomic sustainability. The parallel FX market premium decreased on May 4, 2023 with the 38-percent depreciation of the official exchange rate (ER) operated by the central bank (Banque de la République du Burundi or BRB); however, it has been widening since then; Burundi’s reform program aims to support economic recovery from the recent shocks, restore external sustainability, and strengthen debt sustainability, while creating fiscal space for accelerated and inclusive growth and fostering financial sector resilience; Discussions on performance and policies underpinning the first review under the Extended Credit Facility (ECF) arrangement will continue in the period ahead.

An International Monetary Fund (IMF) team led by Ms. Mame Astou Diouf, Mission Chief for Burundi, visited Bujumbura during January 11−21, 2024 to hold discussions with the Burundian authorities for the first review under the Extended Credit Facility (ECF) Arrangement approved on July 17, 2023 (see PR No. 23/266). At the end of the visit, Ms. Diouf issued the following statement:

“The mission focused on performance and policies underpinning the first review of the 38-month arrangement under the ECF. Discussions covered recent macroeconomic and policy developments, program performance, and near-term prospects and policy plans.

“Economic growth recovered to 2.7 percent in 2023 (from 1.8 percent in 2022). Relatively weak economic activity in the first quarter of 2023 and domestic fuel shortages constrained the recovery, mitigated by agricultural production rebound during the rest of 2023, public investment, and banking activities. Growth is projected to accelerate to 4.3 percent in 2024, supported by strong agricultural production, productive investment, and the ongoing reforms. Increases of pump prices and higher fuel import volume helped reach cost-recovery pricing to contain implicit fuel subsidies and decrease fuel shortages. While inflation pressures were high in 2023, with average inflation estimated at around 27 percent, they have started receding since the last quarter of the year. Average inflation is projected to decrease to around 22 percent in 2024.

“External sustainability remains challenging. The current account deficit remained large in 2023 (13.3 percent of GDP) while FX reserves are low ($96.4 million or 0.8 month of imports at end-2023), owing to the high import bill. Strong remittance inflows, gold exports, the IMF’s first ECF disbursement and other donor financing have helped relieve pressures.

“The 38-percent depreciation of the official ER operated by the BRB on May 4, 2023 temporarily reduced the parallel FX market premium (about 40 percent on May 4). However, the premium has widened since then, recently hovering beyond 55 percent. The financial sector has shown resilience.

“The Burundian authorities’ reform agenda under the ECF arrangement encompasses a broad-based macroeconomic policy recalibration aimed at tackling key challenges.

“ Resuming pro-growth fiscal consolidation to support debt sustainability while protecting living standards. At end-December 2023, the authorities adopted a revised 2023/24 budget aimed at strong fiscal consolidation mainly through strong domestic revenue mobilization efforts, cutting or rephasing of public investment to more sustainable levels than planned under the original budget, and other spending savings, while preserving social spending. Higher donor financing, catalyzed by the ECF program, will also support consolidation. Public debt to GDP is expected to decline over the medium term.

“External policy rebalancing and unwinding monetary financing. The authorities have devised a roadmap towards external sustainability. They recently adopted a new FX market regulation and several market liberalization measures including: (i) gold sector liberalization per the new mining code; (ii) allowing the private sector to transfer repatriated export proceeds to commercial banks (CBs), including for mining exports; and (iii) transferring non-governmental organization accounts from the BRB to CBs. The BRB plans to closely monitor the effectiveness of these measures in improving FX market liquidity conditions.

“Agile monetary policy. While the monetary policy (MP) tightening started in 2023 has helped ease inflation pressures, further tightening may be needed. The modernization of the MP framework, including the adoption of a policy rate and quarterly press releases, is expected to improve MP transmission. Limiting monetary financing will support inflation easing and external policy recalibration efforts.

“Governance and structural reforms will ensure a business environment conducive to private sector-led, job-rich, and inclusive growth.

“The mission also reviewed program performance and policy implementation. Quantitative targets for end-July and end-September 2023 were broadly met, with challenges mostly related to monetary financing and FX scarcity. Revenue collection and execution of social spending were strong. Discussions on the first review of the ECF arrangement will continue in the period ahead with the aim of reaching an agreement on policies and program targets that would support a staff-level agreement for the completion of the review. The IMF remains committed to supporting the efforts of the Burundian authorities in achieving the objectives under the program.

“The mission met with H.E. Prime Minister Gervais Ndirakobuca; H.E. Audace Niyonzima, Minister of Finance, Budget and Economic Planning (MFBPE); Mr. Edouard Normand Bigendako, Governor of the Banque de la République du Burundi; 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 the private sector and donors.

“The mission would like to take this opportunity to warmly thank the Burundian authorities for their great hospitality and cooperation, as well as open and productive discussions.”