## EXECUTIVE SUMMARY (Content unit: 1bdiea2021001)

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### Context
- Burundi described as a fragile state with a history of political tensions and weak institutions.
- Pre-COVID indicators:
  - Real GDP growth: 1.8 percent in 2019.
  - Inflation: averaged -0.7 percent in 2019.
  - Current account (CA) deficit: 11.6 percent of GDP (pre-COVID).
  - Fiscal deficit: 6.2 percent of GDP in 2018/19.
  - FX reserves: 1.3 months of imports at end-2019.
- Exchange rate and FX allocation: BRB exchange rate management and FX allocation were restrictive, contributing to a large parallel market premium.
- Political and development context:
  - 2018–27 development plan (PND) targets export diversification, infrastructure, social safety nets, and governance improvements.
  - President Evariste Ndayishimiye secured 71 percent of the vote in May 2020; engagement with the international community, including the Fund, has improved.

### COVID-19 impact and response
- Health and epidemiological facts:
  - First COVID-19 case: March 31, 2020.
  - As of September 22, 2021: 16356 cases and 12 deaths reported.
  - New cases surpassed 1,000 cases per week since mid-July 2021 (up from average 20 cases/week in 2020 and average 371 cases/week during January–June 2021).
  - Testing: about 2.8 percent of the population tested as of September 29, 2021.
- Government measures and fiscal response:
  - Bujumbura airport closed March–November 2020; land and sea borders closed to passengers on January 11, 2021; fines of about US$ 50 for not wearing masks in Bujumbura introduced September 2021.
  - Pandemic response plan cost: about US$ 150 million (4.7 percent of GDP); sanitary measures cost US$ 58 million (1.8 percent of GDP).
  - Authorities spent 0.8 percent of GDP in 2020/21 (sanitary and non-sanitary measures) and plan to spend 1.1 percent of GDP in 2021/22.
  - Central bank actions: increased flexibility in loan restructuring, targeted/time-bound extensions of loan maturities, and a new refinancing window for banks extending long-term loans to high-growth priority sectors.
  - Vaccination: preparing a strategy, completed the GAVI form, exploring COVAX participation.
- Donor support and urgent needs:
  - World Bank grant: US$5 million.
  - IMF CCRT debt relief: SDR 14.46 million.
  - Debt service relief from Exim Bank of China and the Kuwait Fund: US$ 0.5 million under the G20 DSSI.
  - Technical committee and single fiduciary fund (account at BRB) set up to centralize donor funding.
- COVID-19 spending (authorities’ table):
  - FY2020/21 total: BIF 48.3 (0.80 percent of GDP).
  - FY2021/22 total (planned): BIF 70.4 (1.07 percent of GDP).
  - Select items FY2020/21: Health infrastructure incl. tents BIF 15.6 (0.26 percent of GDP); Reagents and drugs BIF 6.8 (0.11 percent of GDP).

### Macroeconomic impact
- Growth and inflation:
  - Real GDP: estimated contraction of one percent in 2020 (compared to pre-COVID projection of 2.1 percent).
  - Sectoral: services contracted -6.1 percent; primary sector resilient; secondary sector hampered by supply chain issues; public investment supported construction.
  - Average inflation turned positive in 2020 at 7.3 percent, driven by rising food prices.
- External sector and reserves:
  - CA deficit narrowed to 10.4 percent of GDP in 2020.
  - Exports decreased sharply due to airport closure and lockdowns.
  - Financial and capital accounts deteriorated owing to lower investment flows.
  - Official reserves: 0.6 months of imports at end-March 2021 prior to SDR allocation.
  - SDR allocation: SDR 147.6 million (about 6.6 percent of GDP), effective August 23, 2021.
- Financial sector:
  - NPLs: 4.8 percent at end-March 2021; loan restructurings increased.
  - Private credit growth: 21.6 percent at end-2020.

### Financing needs, IMF request, and debt relief
- Financing gaps:
  - Fiscal financing gap in 2021/22: 3.2 percent of GDP.
  - Balance of payments financing needs in 2021: 4.4 percent of GDP.
- IMF engagement:
  - Authorities requested RCF disbursement: SDR 53.9 million (35 percent of quota).
  - Staff recommends RCF disbursement be on-lent for budget support.
- Debt relief:
  - CCRT relief totaling SDR 17.96 million (four tranches).

### Policy stance and recommendations (executive summary)
- Authorities committed to:
  - Balance development, social, and COVID-19 spending needs with debt and external sustainability.
  - Scale up implementation of response plan, deploy sanitary measures, and strengthen social protection.
  - Prudent borrowing, strengthen domestic revenue mobilization, and improve spending efficiency and prioritization.
  - Strengthen governance and transparency of COVID spending (audited reports and collecting beneficial ownership information).
  - Support financial sector health with liquidity injections while monitoring vulnerabilities.
- Key risks:
  - Intensifying COVID-19 spread, low testing and vaccine access, and a large external financing gap despite SDR allocation.

*International Monetary Fund. EXECUTIVE SUMMARY (Content unit: 1bdiea2021001) October 6, 2021.*

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### 6. Budget execution was under pressure in 2020/21, partly due to COVID-related spending

### Fiscal execution and immediate outcomes
- Revenue collection: 18.9 percent of GDP in 2020/21, exceeding the budget target by 1.2 percentage point of GDP.
- COVID-related spending: unforeseen sanitary and non-sanitary expenditures of 0.8 percent of GDP in 2020/21.
- Current spending: higher, reflecting COVID-related subsidies/transfers, administrative changes after 2020 elections, and interest payments.
- Capital spending: under-executed, mainly due to shortfall of project grants.
- Fiscal deficit and financing 2020/21:
  - Fiscal deficit: 6.9 percent of GDP (budget target: 2.5 percent of GDP).
  - Main financing: domestic borrowing of 7.6 percent of GDP.
  - Pending bills anecdotal buildup being audited and may be securitized if verified.
- Public debt: 67 percent of GDP at end-2020.

### Outlook and macro risks
- Medium-term growth: projected around 5 percent, supported by services, agriculture, manufacturing, and capital projects.
- Baseline assumptions: pickup in vaccination, durable political stability, and reengagement with international community with limited external financing flows.
- Projected projects: World Bank, AfDB, European/Chinese/IDP financing expected to increase productive capacity; examples include hydroelectric dams and a $600 million solar project.
- Debt and inflation:
  - Staff assesses debt sustainable but at high risk of debt distress.
  - Heavy reliance on domestic financing worsens domestic debt dynamics.
  - Inflation expected to remain contained.
- External financing gap and BOP:
  - Large external financing gap in 2021: US$ 139.5 million (4.4 percent of GDP).
  - Current account deficit expected to widen in 2021 due to higher imports and worsening terms of trade.
  - Export volumes expected to recover mildly in 2022 with mining exploitation restarting after contract negotiations.
- Scenario elements:
  - Upside: full reengagement with international community; speedy conclusion of mining negotiations; further exchange rate flexibility.
  - Downside: data deficiencies; natural disasters; deterioration of political/security situation; weak global demand and uncontrolled COVID-19 outbreaks.

### Key macroeconomic indicators (selected series)
- Real GDP (percent change): -1.0 1.6 4.2 4.7 4.9 5.2 4.8
- CPI (period average, percent change): 7.3 5.6 4.6 4.2 4.2 4.2 4.2
- Credit to non-government sector (percent change): 18.3 21.0 21.2 13.6 12.9 13.2 13.1
- Revenue and grants (percent of GDP) 1/: 22.3 23.4 24.8 25.5 25.5 25.6 25.6
- Expenditure (percent of GDP) 1/: 28.4 30.2 31.1 28.6 27.6 27.5 27.4
- Overall fiscal balance (percent of GDP) 1/: -6.1 -6.9 -6.3 -3.2 -2.0 -1.9 -1.7
- Public gross nominal debt (percent of GDP): 67.0 71.9 70.2 66.5 62.9 59.5 56.2
  - External public debt: 18.0 20.4 19.2 18.0 16.9 15.9 15.0
  - Domestic public debt: 49.0 51.5 51.0 48.5 46.0 43.6 41.3
- Export volume growth (goods, in percent): -21.6 10.7 6.8 6.6 7.2 8.1 4.7
- Import volume growth (goods, in percent): -16.1 12.7 14.7 4.4 4.2 4.3 4.2
- Current account balance (percent of GDP): -10.4 -17.1 -22.8 -19.6 -19.2 -18.9 -19.0
- Current account balance (US$ million): -315.2 -546.7 -773.7 -711.8 -749.5 -791.7 -856.8
- Gross international reserves (US$ millions): 94.3 411.3 408.6 430.8 455.6 484.3 514.1
- Reserves (months of next year imports): 0.8 3.0 3.0 3.0 3.0 3.0 3.0
- Memorandum: Nominal GDP (BIF billions): 5,821 6,266 6,838 7,480 8,192 8,992 9,852
- Memorandum: Nominal GDP (US$ billions): 3.0 3.2 3.4 3.6 3.9 4.2 4.5

### COVID-19 fiscal response, vaccination costs, and projections
- June 2020 response plan: US$150 million including sanitary Contingency Plan US$58 million (1.8 percent of GDP) and two mass testing campaigns.
- Planned COVID spending 2021/22:
  - Authorities plan: 1.1 percent of GDP (BIF 70.4 billion).
  - Staff projects additional spending: 2.2 percent of GDP required for vaccination (imports and administrative cost).
  - Vaccines cost estimate: $1.8 million per percentage point of population.
    - Mass vaccination would entail 2.1 percent of GDP, assuming 16 percent vaccinated under COVAX (free) and 40 percent by government.
    - Half of vaccines imported H2 2021 and half H1 2022.
- Revenue measures:
  - Strengthening mining tax collection, revising tax laws and exemption eligibility, centralizing nontax revenue, introducing a minimum turnover tax (one percent).
  - 2021/22 budget measures: new tax on mobile phone megabits (18 percent of the cost); removal of exemptions on companies’ sales; anti-pollution tax on imported used vehicles; widening rental tax base to include land leases; annual flat-rate road charge; fees on issuances of exemption certificates; changes to tax declarations; ongoing computerization.
- Fiscal projections and financing 2021/22 (Text Table 3 highlights):
  - Total revenue and grants (percent of GDP): 23.2 23.4 23.6 24.8
  - Revenue (percent of GDP): 17.8 18.9 18.4 19.3
  - Grants (percent of GDP): 5.5 4.4 5.1 5.5
  - Total spending (percent of GDP): 25.8 30.2 25.9 31.1
  - Current (percent of GDP): 15.7 22.3 15.6 21.2
  - Interest (percent of GDP): 1.0 2.6 1.0 2.0
  - Covid spending 1/ (percent of GDP): 0.0 0.8 ... 3.3
  - Investment (percent of GDP): 10.1 8.0 10.3 10.0
  - Overall deficit, incl. Grants (percent of GDP): -2.5 -6.9 -2.3 -6.3
  - Total financing (percent of GDP): 2.5 6.9 2.3 6.3
    - Domestic (net borrowing): 2.3 7.6 2.1 3.4
    - Central Bank (net): 0.0 2.7 0.0 0.6
    - Foreign: 0.2 0.2 0.2 0.5
    - Accounts payable (-=repayment): 0.0 -1.8 0.0 -0.7
    - Unidentified financing (gap): 0.0 0.0 0.0 3.2
    - IMF disbursement (RCF): 0.0 0.0 0.0 2.3
  - Fiscal financing gap: 3.2 percent of GDP in 2021/22.
  - 2021/22 deficit expected to be mainly financed through domestic borrowing and foreign loans; proposed RCF disbursement to be on-lent would help finance vaccine purchase and logistics.
- Budget execution and transparency:
  - COVID spending in 2020/21 mostly executed off-budget using the COVID Fund; authorities committed to exhaustive reporting in 2020/21 budget review report (Loi des Règlements).

*Source: 1bdiea2021001 - 6. Budget execution was under pressure in 2020/21, partly due to COVID-related spending. (IMF).*

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### 16. Options for closing the 2021/22 fiscal financing gap while preserving debt sustainability

### Fiscal options and near-term outlook
- Options to close 2021/22 gap while preserving sustainability:
  - Revenue mobilization, including further containing exemptions (BIF 18 billion in 2020/21).
  - Spending rationalization: reallocations from non-priority to priority/pro-growth spending and capacity building to better estimate interest payments.
  - Re-engagement with international community to boost grants and concessional financing.
  - Securitization of existing domestic arrears planned in 2021/22 budget.
- Medium-term consolidation supported by:
  - Continued domestic revenue mobilization: computerization, widening tax base, digitalization, improved compliance.
  - Lower spending as COVID crisis wanes and improved planning/implementation capacity increases efficiency.
  - Somewhat higher program grants as reengagement accelerates.

### Governance and transparency of COVID spending
- Planned measures:
  - Annual report on COVID spending 2020/21 sent to Cour des Comptes (CC) in August 2021 for audit.
  - Ministry of Finance to prepare bi-annual reports on COVID spending starting end-December 2021, audited by IGE and CC and published within three months of semester end.
  - Collect beneficial ownership (BO) information for companies awarded COVID-related contracts starting end-December 2021.
  - Staff proposes targeted capacity development to assess legal/regulatory provisions on BO and support collection.
  - Staff emphasizes publishing BO information online once collected.
- CCRT commitments:
  - Government on track to fulfill CCRT commitments—audit by CC and publication within 9 months of end of FY2020/21 (by end-March 2022).

### Governance institutions relevant to oversight
- IGE: inspection/control over public services and entities (decree n ° 100/09 of January 15, 2010); reports to President’s Office.
- Cour des Comptes (CC): supreme audit institution (Law n° 1/002 of March 31, 2004); independent; reports to parliament.
- Other anti-corruption institutions: Cour Anti-Corruption (CAC) and Brigade Spéciale Anti-Corruption (BSAC).

### External sustainability and reserves
- SDR allocation intended to increase reserves; authorities intend to use most for reserve buildup.
- Plans to partially ease FX allocation restrictions (for commodity imports) to alleviate bottlenecks and reduce parallel market premium.
- External financing gap: US$ 139.5 million in 2021.
- Staff roadmap for external stability:
  - Greater exchange rate flexibility (possibly gradual).
  - Reforms to alleviate FX market distortions and move toward market-based FX allocation.
  - Clarify monetary policy framework.
  - Assess exchange restrictions under Article VIII in next Article IV.

### Monetary policy and financial sector
- BRB accommodative measures since 2020:
  - Liquidity provided in 2020 about 16 percent higher than 2019; new refinancing window for priority sectors.
  - Forbearance: increased flexibility of loan restructuring (fourth restructuring allowed subject to approval); renegotiation of interest rates for struggling debtors.
- Financial sector vulnerabilities:
  - NPLs stable but concentrated in business, housing, transport, and health sectors.
  - One third of loans in commerce restructured; forbearance could mask vulnerabilities.
  - Recommendation: forward-looking supervision to detect emerging tensions.
- BRB readiness:
  - BRB stands ready to recalibrate liquidity provisions and monitor restructurings; continues tight forbearance implementation.

### Access to IMF financing and capacity to repay
- RCF request: purchase of 35 percent of quota (SDR 53.9 million).
- Rationale: address BOP and fiscal financing needs for COVID-19, vaccination costs, deferred COVID spending.
- RCF purchase would meet about 55 percent of 2021 BOP financing needs (4.4 percent of GDP).
- Donor financing disbursed/committed for 2021 totals 9.1 percent of GDP (major part from World Bank, AfDB, EXIM Bank India); additional external financing needed.
- Debt sustainability:
  - Staff assesses debt sustainable but at high risk of external and overall debt distress; DSA shows breaches of some indicators.
  - SDR allocation: SDR 147.6 million (6.6 percent of GDP) mitigates vulnerabilities.
- Fund exposure and repay capacity:
  - RCF disbursement would result in Fund exposure to Burundi ~3 percent of GDP at end-2021 (or 28 percent of international reserves).
  - Mitigants: excellent track record in servicing Fund debt, modest external debt, SDR allocation, improved donor prospects, further CCRT support.
- Safeguards:
  - Authorities committed to a safeguards assessment before any subsequent arrangement; last assessment in 2012.
  - BRB audited FY2019/20 financial statements published; MoU signed between BRB and government on responsibilities for servicing IMF obligations.

### Staff appraisal and priorities
- Key figures:
  - Real GDP contracted about one percent in 2020.
  - Fiscal financing gap 2021/22: 3.2 percent of GDP.
  - External financing gap 2021: 4.4 percent of GDP.
  - Poverty rate: 85 percent in 2020.
- Staff recommendations:
  - Scale up response plan, ramp up testing, continue sanitary measures, broaden social programs targeting women, youth, disabled people, and disaster victims.
  - Strengthen domestic revenue mobilization and fiscal governance of COVID spending (prepare execution reports to be audited/published; collect BO information).
  - BRB to adjust monetary/financial policies as needed and leverage stronger external financing.
- Engagement path:
  - Burundi meets conditions for RCF financing; proposed RCF disbursement part of multi-step engagement.
  - Next steps: Article IV consultation mission to develop broader macro and structural reform agenda.

*Source: IMF staff report (selected excerpts).*

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### 33. Staff supports the authorities’ request for a disbursement of SDR 53.9 million (35 percent of quota)

### Disbursement request and staff rationale
- Staff supports disbursement: SDR 53.9 million (35 percent of quota) under RCF exogenous shock window.
- Basis for support:
  - Immediate and urgent BOP needs from the COVID-induced exogenous shock.
  - COVID shock exacerbated external sustainability challenges.
  - Authorities’ existing and prospective policies responding to the shock.
- Recommended modality:
  - Disbursement to be on-lent for budget support to provide space for socio-economic interventions and allow more gradual policy adjustment.

### Debt sustainability and capacity to repay
- Debt assessment: sustainable but at high risk of distress.
- Capacity to repay: remains adequate.

### Selected recent indicators
- Fiscal and public debt (overall balance percent of GDP): -6.7 (2018), -6.2 (2019), -6.5 (2020), -6.1 (2021), projected -1.7 (2026).
- Public gross nominal debt (percent of GDP): 53.0 (2018), 60.3 (2019), 59.7 (2020), 61.5 (2021), projected 56.2 (2026).
- Real GDP (annual percent change): 1.6 (2018), 1.8 (2019), 2.1 (2020), -1.0 (2021), projected 2.1 (2022) and 4.2 (2023).
- Current account balance (incl. grants, percent of GDP): -11.4 (2018), -11.6 (2019), -16.9 (2020), -10.4 (2021), projected -22.8 (2024) and -19.0 (2026).
- Gross international reserves (US$ millions): 70.3 (2018), 113.4 (2019), 113.4 (2020), 94.3 (2021), projected 514.1 (2026).
- NPLs (percent of gross loans): 9.2 (Dec 2018), 5.6 (Dec 2019), 6.6 (Mar 2020), 6.2 (Dec 2020), 4.8 (Mar 2021).
- Outstanding Fund credit (SDR million): 45.8 (2018), 34.0 (2019), 18.1 (2020), 67.8 (2021), projected 0.0 by 2031.

### Risks and policy implications
- Risks tilted to downside; vulnerabilities include:
  - Critically low reserves post-2015 crisis.
  - Persistent large current account deficits and elevated fiscal deficits excluding grants.
  - High risk of debt distress despite sustainability assessment.
- Policy implication:
  - On-lent RCF disbursement recommended for budget support to mitigate socio-economic impacts and allow gradual fiscal adjustment.
  - Continued monitoring of external financing flows, reserve positions, and debt-service obligations.

*Source: IMF staff report excerpt (Burundi): staff supports a disbursement of SDR 53.9 million under the Rapid Credit Facility; selected tables and figures as provided in the source content.*

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### Annex I. Risk Assessment Matrix (selected risks and policy responses)

### Domestic risks (likelihood, impact, policy responses)
- Reengagement with international community:
  - Likelihood: High; Expected impact: High.
  - Policy response: Accelerate engagement; avoid delaying essential structural reforms; improve political/social situation; transparency and accountability in public spending.
- Adverse weather:
  - Likelihood: Low; Expected impact: Short Term. Medium.
  - Policy response: Guard against second-round inflation effects; targeted programs; reprioritize spending; strengthen revenue mobilization.
- Deterioration of political/security situation:
  - Likelihood: Low; Expected impact: Short to Medium Term. Medium.
  - Policy response: Allow automatic stabilizers; support vulnerable population; prudent use of fiscal/monetary policy.

### Conjunctural shocks (likelihood, impact, policy responses)
- Uncontrolled COVID-19 outbreaks:
  - Likelihood: Medium; Expected impact: Medium.
  - Policy response: Accelerate national vaccination framework; prioritize health and social protection spending.
- Widespread social discontent/political instability:
  - Likelihood: Medium; Expected impact: High.
  - Policy response: Targeted support to vulnerable groups; prudent fiscal/monetary response.
- Rising commodity prices (upside):
  - Likelihood: Medium; Expected impact: High.
  - Policy response: Disciplinary fiscal policy to contain absorption and preserve FX reserves.

### Structural risks and policy responses
- Intensified geopolitical tensions:
  - Likelihood: Medium; Expected impact: Medium.
  - Policy response: Strengthen revenue administration and spending framework; increase reserve buffers via more flexible ER; accommodative monetary policy if inflation in check.

*Source: Annex I. Risk Assessment Matrix and accompanying sections from the provided IMF document.*

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### Annex II. Growth dynamics and structural drivers (selected points)

### Pre-COVID drivers of growth
- Agriculture: main driver in 2019; sector contributes on average 39.7 percent of GDP and employs 84 percent of labor force.
- Key agro measures (PNIA 2016−2020): better seeds, access to fertilizers, mechanization, training, land expansion, increased financing (including for women), coffee sector reform, BRB loan to boost coffee productive capacity, BRB loan to expand fertilizer firm capacity (Treasury-guaranteed).
- Import substitution: PND aims to reduce import dependence via domestic production modernization, increased electricity supply, and agrobusiness support.
- Banking: Banking Act (Law n°1/17 of August 22, 2017) updated to increase credit provision and improve regulation; leverages digital technology.

*Source: Annex II and related sections from the IMF document.*

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### Appendix I. Key points from the Letter of Intent (October 5, 2021)

- Purpose: Request RCF assistance to manage COVID-19 and limit socio-economic impacts.
- Acknowledgement: Government thanks IMF for CCRT debt relief totaling SDR 14.46 million.
- COVID response financing:
  - Response plan: US$150 million including Contingency Plan US$58 million.
  - Actions: hygiene measures, reception center activation, equipping specialized labs, test kits and reagents, hiring health personnel.
- Economic impact summary:
  - Growth projections revised downward; contraction in 2020.
  - Social measures: four main social protection projects; creation of Women’s Bank and Youth Bank.
  - Budget effects: increased current expenditure, under-executed capital spending, revenue overperformance but higher spending increased public debt (domestic).
  - External position: official reserves fell to 0.8 month of imports of goods and services of 2020 in May 2021; bolstered by new SDR allocation (SDR 147.6 million, equivalent to US$ 211 million).
- 2021/22 budget priorities:
  - Initial envelope: BIF 70.4 billion allocated for COVID-19 response.
  - Priorities aligned with PND and PNCP-SS-PCE: (i) agriculture and livestock, (ii) public health, (iii) industrialization, (iv) economic/social infrastructure, (v) youth employment and social protection.
- Medium-term coordination:
  - Emphasis on coordination among fiscal, monetary, and sectoral policies; continued reforms in public finance management; request for informal technical discussions with IMF experts.

*Source: Annex I. Key points from the Letter of Intent.*

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### 11. RCF purpose, modalities, and Debt Sustainability Analysis (selected findings)

### Purpose and modalities
- RCF request motive: support pandemic response and resilience; requested SDR 53.9 million (35 percent of quota).
- Use of funds: direct budget support to national treasury account at BRB.
- Reporting/audit commitments:
  - Semi-annual reports on RCF execution to Court of Auditors for audit within one month after semester end; audited reports published within three months.
  - Collect ultimate beneficiary ownership information starting end-December 2021.
  - Host safeguards assessment and provide BRB audit reports/management letters to IMF.

### Debt Sustainability Analysis (DSA) headline judgments
- Risk ratings:
  - Risk of external debt distress: High.
  - Overall risk of debt distress: High.
- Key DSA findings:
  - Two external debt burden indicators and one overall public debt indicator breach thresholds under baseline.
  - PV of public debt-to-GDP breach significant and protracted.
  - External debt indicators breach mildly and fall near threshold in medium term.
- Vulnerabilities:
  - External debt vulnerable to export shocks.
  - Overall public debt vulnerable to GDP growth shocks.
- Mitigants:
  - SDR allocation: SDR 147.6 million (6.6 percent of GDP).
  - Prospects for reengagement with donors and concessional financing.
  - Greater ER flexibility and competitiveness reforms.

### Public debt composition and contingent liabilities
- Public debt rose from 38 percent of GDP end-2014 to 67 percent at end-2020.
- Domestic debt increased from 17.4 percent of GDP end-2014 to 49 percent end-2020.
- External debt fell from 20.6 percent to 18 percent of GDP over same period.
- Central bank guaranteed AFREXIM loan: $40 million contracted Dec 2019; remaining balance US$ 35 million (1.1 percent of GDP) at end-2020.
- Contingent liabilities assumptions: SOE debt default value 2 percent of GDP; financial markets contingent liabilities default value 5 percent of GDP; total contingent liabilities assumed about 9.5 percent of GDP.

*Source: IMF and IDA Joint DSA for Burundi, October 6, 2021.*

---

### Stress tests, realism tools, and policy priorities (selected conclusions)

- Stress test findings:
  - External debt distress risk: High; PV of external debt-to-exports and external debt service-to-exports ratios exceed thresholds in certain years.
  - Public debt distress risk: High; PV of public debt-to-GDP breaches threshold under baseline and remains above threshold through projection horizon.
  - Main sensitivities: exports and non-debt flows (external); GDP growth (public).
- Realism tools and outlook:
  - Baseline growth peak around 5.2 percent medium-term, settling around 4 percent long-term.
  - Fiscal adjustment projected to start FY2022/23 with revenue improvements and reduced COVID spending.
  - Financing composition shifts toward domestic financing over time (domestic share of deficit financing rising toward 100 percent by FY2026/27 in staff baseline).
- Policy and reform priorities:
  - Implement PND 2018–27 to boost exports and growth.
  - Pursue import substitution to reduce FX bottlenecks.
  - Re-engage with international community to mobilize grants and concessional loans.
  - Strengthen revenue administration, spending efficiency, and transparency (including BO information and audited COVID spending reports).
  - Gradually increase exchange rate flexibility and reform FX allocation mechanisms.

*Sources: DSA text, stress test summaries, realism tools, and policy recommendations as presented in the IMF document.*

*International Monetary Fund. Selected excerpts from staff report and DSA (Content unit: 1bdiea2021001).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- Burundi is described as a fragile state with a history of political tensions and weak institutions.
- Prior to the COVID-19 pandemic:
  - Real GDP growth was positive, at 1.8 percent in 2019.
  - Inflation averaged -0.7 percent as food prices fell with abundant agricultural production.
  - The current account (CA) deficit was 11.6 percent of GDP.
  - The fiscal deficit was 6.2 percent of GDP in 2018/19.
  - Foreign exchange (FX) reserves were 1.3 months of imports at end-2019.
  - The central bank’s (BRB) exchange rate management and FX allocation were restrictive, contributing to a large parallel market premium.
- The 2015 political crisis triggered a deep recession and deterioration of living standards; Burundi’s 2018–27 development plan (PND) targets export diversification, infrastructure, social safety nets, and governance improvements.
- Political developments: President Evariste Ndayishimiye secured 71 percent of the vote in May 2020; engagement with the international community, including the Fund, has improved and the authorities have agreed to resume Article IV consultations.

### COVID-19 impact and response
- Health and epidemiological data:
  - First COVID-19 case reported on March 31, 2020.
  - As of September 22, 2021: 16356 cases and 12 deaths reported.
  - New cases surpassed 1,000 cases per week since mid-July 2021 (up from an average of 20 cases per week in 2020 and an average of 371 cases per week during January–June 2021).
  - Testing capacity weak: about 2.8 percent of the population tested as of September 29, 2021.
- Government measures and response plan:
  - Bujumbura airport closed March–November 2020; land and sea borders closed to passengers on January 11, 2021; fines of about US$ 50 introduced in September 2021 for not wearing masks in Bujumbura.
  - Pandemic response plan estimated at about US$ 150 million (4.7 percent of GDP), of which sanitary measures cost US$ 58 million (1.8 percent of GDP).
  - The authorities promoted soft preventative measures, subsidized the price of soap (June−September 2020) and water for standpipes (up to 50 percent), hired additional doctors and nurses, and granted tax holidays to affected businesses.
  - As part of the response plan, the authorities spent 0.8 percent of GDP in 2020/21 (sanitary and non-sanitary measures) and plan to spend 1.1 percent of GDP in 2021/22.
  - Central bank measures: increased flexibility in loan restructuring, targeted and time-bound extensions of loan maturities, and a new refinancing window for banks extending long-term loans to high-growth priority sectors.
  - Vaccination: Burundi is preparing a vaccination strategy, completed the GAVI form, and is exploring COVAX participation.
- Urgent needs and donor support:
  - Stronger diagnostic capacity (rapid testing and molecular analysis) and better logistics are warranted.
  - Donor support reported: World Bank grant of US$5 million; IMF CCRT debt relief (SDR 14.46 million) and debt service relief from Exim Bank of China and the Kuwait Fund (US$ 0.5 million) under the G20 DSSI.
  - A technical committee and a single fiduciary fund (account at BRB) were set up to centralize donor funding.
- COVID-19 spending (authorities’ table):
  - FY2020/21 total: BIF 48.3 (0.80 percent of GDP).
  - FY2021/22 total (planned): BIF 70.4 (1.07 percent of GDP).
  - Select items FY2020/21: Health infrastructure incl. tents BIF 15.6 (0.26 percent of GDP); Reagents and drugs BIF 6.8 (0.11 percent of GDP).

### Macroeconomic impact
- Growth and inflation:
  - Real GDP is estimated to have contracted by one percent in 2020 (compared to growth of 2.1 percent projected pre-COVID).
  - Sectoral effects: services contracted sharply (-6.1 percent), primary sector resilient with steady subsistence agriculture growth, secondary sector hampered by supply chain issues, public investment supported construction.
  - Average inflation turned positive in 2020 at 7.3 percent, driven by rising food prices.
- External sector and reserves:
  - The CA deficit narrowed to 10.4 percent of GDP in 2020, reflecting lower international fuel prices, countercyclical workers’ remittances, and lower import growth due to FX rationing.
  - Exports decreased sharply due to airport closure and lockdowns in trading partners disrupting coffee and tea exports.
  - Financial and capital accounts deteriorated significantly owing to lower investment flows.
  - Official reserves were 0.6 months of imports at end-March 2021 prior to the SDR allocation.
  - New SDR allocation: SDR 147.6 million (about 6.6 percent of GDP), effective August 23, 2021, which helped rebuild reserve buffers.
- Monetary and financial sector:
  - Banking system appears broadly resilient; NPLs 4.8 percent at end-March 2021, but loan restructurings have increased.
  - Private credit growth 21.6 percent at end-2020, supported by monetary policy.

### Financing needs, IMF request, and debt relief
- Pandemic-related financing gaps:
  - Fiscal financing gap in 2021/22 estimated at 3.2 percent of GDP (driven by sanitary and social spending needs and expected vaccine costs).
  - Balance of payments financing needs in 2021 estimated at 4.4 percent of GDP, reflecting imports needs (including vaccines and other COVID-related imports) and replenishment of reserves to cover three months of imports.
- IMF engagement and request:
  - The authorities requested financial assistance under the exogenous shock window of the Rapid Credit Facility (RCF), requesting a disbursement of SDR 53.9 million (equivalent to 35 percent of quota) to address immediate BOP and fiscal financing needs from the COVID-19 pandemic.
  - IMF staff supports the RCF request and recommends that the disbursement be on-lent for budget support to provide space for interventions to mitigate the socio-economic impact of the pandemic and support gradual policy adjustment.
- Debt relief and relief measures:
  - Burundi benefitted from debt relief under the Catastrophe Containment and Relief Trust (CCRT) totaling SDR 17.96 million (four tranches).

### Policy stance and recommendations
- Authorities’ commitments and measures:
  - Committed to balancing development, social, and COVID-19 spending needs with debt and external sustainability.
  - Plan to scale up implementation of the response plan, deploy sanitary measures, and strengthen social protection.
  - Remain committed to prudent borrowing, preserving debt sustainability, strengthening domestic revenue mobilization, and improving spending efficiency and prioritization.
  - Steps taken to strengthen governance and transparency of COVID spending: preparing audited reports on COVID spending and committing to collect information on ultimate beneficiary ownership of companies awarded COVID-related contracts.
  - Plan to support financial sector health with liquidity injections while monitoring financial sector vulnerabilities and macroeconomic conditions.
  - Committed to balancing external sustainability and protecting reserves coverage against other macroeconomic policy challenges.

### Outlook and risks (high-level points from executive summary)
- The pandemic and border closures resulted in a sharp economic slowdown in 2020; an intensifying COVID-19 spread is yet to be curbed.
- Testing capacity and access to vaccines remain among the lowest in the world, constraining pandemic containment.
- The external financing gap could result in economic disruption if not addressed despite the SDR allocation providing relief.

_International Monetary Fund. EXECUTIVE SUMMARY (Content unit: 1bdiea2021001) October 6, 2021._

### 6. Budget execution was under pressure in 2020/21, partly due to COVID-related spending.

### 6. Budget execution was under pressure in 2020/21, partly due to COVID-related spending.

### Fiscal execution and immediate outcomes
- Revenue collection: 18.9 percent of GDP in 2020/21, exceeding the budget target by 1.2 percentage point of GDP. Supported by buoyant taxes on goods and services (mainly VAT on imports), and taxes on income and international trade.
- COVID-related spending: unforeseen sanitary and non-sanitary expenditures of 0.8 percent of GDP in 2020/21 contributed to above-target spending.
- Current spending: higher current spending reflected partly COVID-related subsidies and transfers (hiring of doctors and nurses and implementation of the authorities’ sanitary plan), administrative changes following the 2020 general elections, and interest payments.
- Capital spending: under-executed, mostly owing to a shortfall of project grants.
- Fiscal deficit and financing in 2020/21:
  - Fiscal deficit: 6.9 percent of GDP (compared with a budget target of 2.5 percent of GDP).
  - Main financing: domestic borrowing of 7.6 percent of GDP.
  - Anecdotal evidence suggests a buildup of pending bills in 2020/21, which are being audited and will be securitized as per the law, if verified.
- Public debt: 67 percent of GDP at end-2020.

### Outlook and macro risks
- Medium-term growth prospects:
  - Growth projected to increase to around 5 percent over the medium term, supported by stronger services activities, agricultural and manufacturing production, and capital projects.
  - Assumptions underpinning baseline: pickup in vaccination, durable political stability, and initial reengagement with the international community with sustained although still limited external financing flows.
  - Ongoing/planned projects (World Bank, AfDB, European/Chinese/IDP financing) expected to increase productive capacity; examples include hydroelectric dams and a $600 million solar project.
- Debt and inflation outlook:
  - Staff assesses Burundi’s debt sustainable, but at high risk of debt distress.
  - Heavy reliance on domestic financing worsens domestic debt dynamics.
  - Inflation is expected to remain contained.
- External financing gap and balance of payments:
  - Large external financing gap in 2021 of US$ 139.5 million (4.4 percent of GDP).
  - Current account deficit is expected to widen in 2021 due to higher imports (COVID-related needs and easing of import restrictions as SDR allocation supports FX availability) and worsening terms of trade (notably petroleum).
  - Export volumes expected to recover mildly in 2022 with mining exploitation restarting after contract negotiations conclude.
- Upside and downside scenario elements:
  - Upside: full reengagement with the international community would significantly boost external financing, fiscal space for public investment, reserves, and support a more ambitious reform agenda; a speedy conclusion of mining company negotiations would strengthen growth prospects; further exchange rate flexibility would enhance competitiveness and fiscal space.
  - Downside: data deficiencies; natural disasters; deterioration of political and security situation; weak global demand and investor confidence due to uncontrolled COVID-19 outbreaks and vaccination delays; social, political, and geopolitical instability.

### Key macroeconomic indicators (selected series as reported)
- Real GDP (percent change): -1.0 1.6 4.2 4.7 4.9 5.2 4.8
- CPI (period average, percent change): 7.3 5.6 4.6 4.2 4.2 4.2 4.2
- Credit to non-government sector (percent change): 18.3 21.0 21.2 13.6 12.9 13.2 13.1
- Revenue and grants (percent of GDP) 1/: 22.3 23.4 24.8 25.5 25.5 25.6 25.6
- Expenditure (percent of GDP) 1/: 28.4 30.2 31.1 28.6 27.6 27.5 27.4
- Overall fiscal balance (percent of GDP) 1/: -6.1 -6.9 -6.3 -3.2 -2.0 -1.9 -1.7
- Public gross nominal debt (percent of GDP): 67.0 71.9 70.2 66.5 62.9 59.5 56.2
  - of which: external public debt: 18.0 20.4 19.2 18.0 16.9 15.9 15.0
  - domestic public debt: 49.0 51.5 51.0 48.5 46.0 43.6 41.3
- Export volume growth (goods, in percent): -21.6 10.7 6.8 6.6 7.2 8.1 4.7
- Import volume growth (goods, in percent): -16.1 12.7 14.7 4.4 4.2 4.3 4.2
- Current account balance (percent of GDP): -10.4 -17.1 -22.8 -19.6 -19.2 -18.9 -19.0
- Current account balance (US$ million): -315.2 -546.7 -773.7 -711.8 -749.5 -791.7 -856.8
- Gross international reserves (in millions of US$): 94.3 411.3 408.6 430.8 455.6 484.3 514.1
- Reserves (in months of next year imports): 0.8 3.0 3.0 3.0 3.0 3.0 3.0
- Unidentified BOP financing (US$ millions) 2/: 0.0 62.3 33.3 22.2 24.8 28.7 29.9
- Memorandum: Nominal GDP (billions of Burundi Francs): 5,821 6,266 6,838 7,480 8,192 8,992 9,852
- Memorandum: Nominal GDP (in billions of US$): 3.0 3.2 3.4 3.6 3.9 4.2 4.5

### COVID-19 fiscal response, vaccination costs, and fiscal projections
- June 2020 COVID-19 response plan:
  - Costed at US$150 million including a sanitary plan of US$58 million (1.8 percent of GDP) and two COVID mass testing campaigns.
  - Technical committee established; account opened at the BRB to centralize donor funding.
  - Mitigation measures were limited in 2020/21 due to constrained financing.
- Planned COVID spending in 2021/22:
  - Authorities plan to accommodate COVID spending of 1.1 percent of GDP (BIF 70.4 billion) in 2021/22.
  - Staff projects additional spending of 2.2 percent of GDP required for vaccination (imports and administrative cost).
  - Vaccines cost estimate: $1.8 million for each percentage point of the Burundian population.
    - Based on this, mass vaccination would entail spending of 2.1 percent of GDP, assuming 16 percent of the population vaccinated under COVAX (free) and 40 percent by the government.
    - Half of the vaccines would be imported during H2 of 2021 and the other half during H1 of 2022.
- Revenue and policy measures to strengthen revenues:
  - Full-year implementation of 2020/21 measures and new 2021/22 actions: strengthening mining tax collection, revising tax laws and exemption eligibility, centralizing nontax revenue at Office Burundais des Recettes, and introducing a minimum turnover tax (one percent).
  - 2021/22 budget measures: new tax on mobile phone megabits (18 percent of the cost); removal of exemptions (income tax and VAT) on companies’ sales; anti-pollution tax on imported used vehicles; widening rental tax base to include land leases; annual flat-rate road charge; fees on issuances of exemption certificates; changes to tax declarations; ongoing computerization of revenue collection.
- Fiscal projections and financing for 2021/22 (Text Table 3):
  - Total revenue and grants (percent of GDP): 23.2 23.4 23.6 24.8
  - Of which: Revenue (percent of GDP): 17.8 18.9 18.4 19.3
  - Grant (percent of GDP): 5.5 4.4 5.1 5.5
  - Total spending (percent of GDP): 25.8 30.2 25.9 31.1
  - Of which: Current (percent of GDP): 15.7 22.3 15.6 21.2
  - Of which: interest (percent of GDP): 1.0 2.6 1.0 2.0
  - Of which: Covid spending 1/ (percent of GDP): 0.0 0.8 ... 3.3
  - Investment (percent of GDP): 10.1 8.0 10.3 10.0
  - Overall deficit, incl. Grants (percent of GDP): -2.5 -6.9 -2.3 -6.3
  - Total financing (percent of GDP): 2.5 6.9 2.3 6.3
    - Of which: Domestic (net borrowing): 2.3 7.6 2.1 3.4
    - Of which: Central Bank (net): 0.0 2.7 0.0 0.6
    - Of which: Foreign: 0.2 0.2 0.2 0.5
    - Accounts payable (-=repayment): 0.0 -1.8 0.0 -0.7
    - Unidentified financing (gap): 0.0 0.0 0.0 3.2
    - Of which: IMF disbursement (RCF): 0.0 0.0 0.0 2.3
  - Fiscal financing gap: projected at 3.2 percent of GDP in 2021/22.
  - The 2021/22 deficit is expected to be mainly financed through domestic borrowing and foreign loans. The proposed RCF disbursement (to be on-lent to the government) would help finance COVID spending including vaccine purchase and logistical costs.
- Budget execution and transparency:
  - COVID-related spending in 2020/21 was mostly executed off-budget using the COVID Fund to accelerate spending execution, but such spending is included in some current and investment lines (e.g., transfers to hospitals).
  - Authorities committed to exhaustively reporting COVID outlays in the 2020/21 budget review report (Loi des Règlements), consistent with regular procedures.
  - Using usual budget procedures would facilitate monitoring the execution of COVID spending.

*Source: 1bdiea2021001 - 6. Budget execution was under pressure in 2020/21, partly due to COVID-related spending. (IMF).*

### 16.   There are a few options for closing the estimated 2021/22 fiscal financing gap, while

### 16.   There are a few options for closing the estimated 2021/22 fiscal financing gap, while

### Fiscal options and near-term fiscal outlook
- Options to close the estimated 2021/22 fiscal financing gap while preserving debt sustainability:
  - Revenue mobilization efforts, including further containing exemptions (BIF 18 billion in 2020/21).
  - Spending rationalization, including reallocations from non-priority sectors to priority and pro-growth spending and capacity building to better estimate interest payments.
  - Re-engagement with the international community to boost grants and concessional financing and help maintain debt sustainability.
  - Securitization of existing domestic arrears is planned in the 2021/22 budget.
- Beyond 2021/22, fiscal consolidation will be supported by:
  - Continued domestic revenue mobilization: computerization of the administration, widening of the tax base, digitalization of revenue collection, and improvements in compliance.
  - Lower spending as the COVID crisis wanes and planning and implementation capacity improves, increasing spending efficiency (both current and investment spending).
  - Somewhat higher program grants as reengagement with donors accelerates.

### Governance and transparency of COVID spending
- Planned transparency and governance measures:
  - Authorities prepared an annual report on COVID spending executed during 2020/21, sent to the “Cour des Comptes” (CC) in August 2021 for audit.
  - Ministry of Finance will prepare bi-annual reports on COVID spending, starting with spending at end-December 2021, to be audited by the “Inspection Générale de l’Etat” (IGE) and the “Cour des Comptes” (CC) and published on the ministry’s website within three months of the end of each semester.
  - Commitment to collect beneficial ownership (BO) information for companies awarded COVID-related contracts starting end-December 2021 using the current framework.
  - Staff proposes targeted capacity development (CD) to assess regulatory and legal provisions on BO information and support collection if not currently available.
  - Staff emphasized publishing beneficial ownership information online once collected.
- Compliance with CCRT debt relief commitments:
  - Government on track to fulfill commitments under the CCRT debt relief—audit by the CC of COVID spending execution and publication within 9 months of the end of FY2020/21 (by end-March 2022).

### Governance institutions (Box 4) — roles relevant to oversight
- IGE (Inspection Générale de l’Etat):
  - Conducts inspection and control over operation and management of public services, institutions, bodies, and private companies or associations subject to its control (decree n ° 100/09 of January 15, 2010).
  - Reports submitted to the President’s Office, which decides on publication.
- Cour des Comptes (CC):
  - Supreme control and audit institution (Law n° 1/002 of March 31, 2004), independent of the executive, reports to parliament.
  - Can examine and certify public accounts, audit overall management of resources, recommend changes, and monitor implementation.
- Other anti-corruption institutions:
  - Cour Anti-Corruption (CAC) designs policies for prevention and repression of corruption.
  - Brigade Spéciale Anti-Corruption (BSAC) combats corruption and organized crimes using intelligence, investigations, and prosecutions.

### External sustainability and reserves
- SDR allocation and FX policy:
  - Recent SDR allocation intended to increase reserves above recent critically low levels; authorities intend to use most allocation for reserve buildup.
  - Plans to partially ease FX allocation restrictions (notably for commodity imports) to alleviate growth bottlenecks and reduce FX parallel market premium.
  - Plan to use part of SDR allocation to fill remaining fiscal financing gap if additional financing is absent.
- External financing needs heightened by COVID-19:
  - External financing gap estimated at US$ 139.5 million in 2021 and beyond.
  - Absent additional external financing, FX reserves would remain below adequacy levels in the medium term.
- Roadmap for external stability (staff advice):
  - Mix of (i) greater flexibility in exchange rate (ER) management, possibly gradual; (ii) reforms to alleviate FX market distortions and support movement toward a market-based FX allocation system; and (iii) clarifying the monetary policy framework.
  - Agreement to assess exchange restrictions under Article VIII in the context of the next Article IV consultation.
- Reserve adequacy note:
  - The ARA metric for Burundi is estimated between 2.5 to 5 months of imports, depending on assumptions of ER policy, with the lower bound reflecting a fully floating ER.

### Monetary policy and financial sector
- BRB accommodative measures since 2020 to support the economy:
  - Liquidity provision: liquidity provided in 2020 was about 16 percent higher than in 2019; creation of a new refinancing window for banks lending to priority sectors.
  - Forbearance: increased flexibility of loan restructuring procedures and allowed a fourth restructuring subject to approval (only four banks benefitted due to stringent scrutiny and required fees); allowed renegotiation of interest rates for debtors struggling to repay, especially in trade sector.
- Financial sector resilience and vulnerabilities:
  - BRB measures supported liquidity and contained loan portfolio deterioration; NPLs stable but concentrated in business, housing, transport, and health sectors.
  - Loan restructuring could mask vulnerabilities—one third of loans in commerce have been restructured.
  - Recommendation for a forward-looking approach to supervision to detect emerging tensions.
- BRB readiness:
  - BRB stands ready to recalibrate liquidity provisions and monitor loan restructurings; continues tight implementation of forbearance policies to contain risks.
  - Adequate policy calibration essential since inflation is mostly driven by supply disruptions and monetary transmission strength is unclear.

### Access to IMF financing and capacity to repay
- Authorities request:
  - Requesting a purchase under the exogenous shock window of the Rapid Credit Facility (RCF) of 35 percent of quota (equivalent to SDR 53.9 million) to cope with COVID-19 impact.
- Rationale for RCF:
  - Pandemic exacerbated BOP financing needs and created a fiscal financing gap; urgent attention needed for vaccination costs and financing deferred COVID spending.
  - RCF to be disbursed to BRB and on-lent to government for COVID-related spending; would help cushion effects on FX reserves.
- Financing context and gaps:
  - RCF purchase would meet about 55 percent of the 2021 BOP financing needs (4.4 percent of GDP).
  - Donor financing already disbursed or committed for 2021 totals 9.1 percent of GDP (large part from World Bank, African Development Bank, and EXIM Bank India); additional external financing needed to meet remaining BOP financing needs.
  - Prospects for vaccine financing positive but contingent on authorities’ request (notably from World Bank and USAID).
- Debt sustainability and risks:
  - Staff assesses Burundi’s debt as sustainable based on authorities’ commitment to fiscal consolidation and reengagement with international community (DSA, Appendix II).
  - DSA shows country at high risk of external and overall public debt distress; key risks: large stock of domestic debt, elevated overall debt service-to-revenue ratio, and liquidity constraints for external debt service.
  - Risks to external debt service mitigated by strong and resilient remittances flows—ratio of external debt service to exports and remittances is much lower than without remittances.
  - SDR allocation: SDR 147.6 million, equivalent to 6.6 percent of GDP, provides additional mitigation.
  - Assessment subject to significant risks including weak information on public enterprise debt.
- Capacity to repay the Fund:
  - RCF disbursement would result in Fund exposure to Burundi of about 3 percent of GDP at end-2021 (or 28 percent of international reserves).
  - Risks: narrow export base and below-adequacy norm FX reserves.
  - Mitigants: excellent track record in servicing Fund debt, modest external debt, the SDR allocation, improved prospects for re-engaging with donors, and further support under the CCRT.
- Safeguards:
  - Authorities committed to undergo a safeguards assessment before any subsequent arrangement approval; last safeguards assessment was in 2012.
  - Authorities published BRB’s audited FY2019/20 financial statements.
  - Memorandum of Understanding signed between BRB and government to establish responsibilities for servicing financial obligations to the IMF.

### Staff appraisal and key macro figures
- Economic impact and gaps:
  - Real GDP estimated to have contracted by about one percent in 2020.
  - Pandemic and associated measures induced a fiscal financing gap in 2021/22 of 3.2 percent of GDP and an external financing gap in 2021 of 4.4 percent of GDP.
  - Poverty rate was 85 percent in 2020; urgency for support to the most vulnerable emphasized.
- Staff welcomes and recommends:
  - Authorities’ efforts to curb COVID-19 spread, scale up implementation of response plan, ramp up testing capacity, continue sanitary measures, and broaden social programs targeting women, youth, disabled people, and natural disaster victims.
  - Domestic revenue mobilization efforts to support debt sustainability and priority spending space.
  - Strengthening fiscal governance of COVID spending: preparing execution reports to be audited and published, and collecting beneficial ownership information for companies awarded COVID-related contracts.
  - BRB’s plan to adjust monetary and financial policies as needed and to gradually address balance of payments challenges leveraging stronger external financing inflows.
- Engagement path:
  - Burundi meets conditions for RCF financing; proposed RCF disbursement is part of a multi-step engagement addressing immediate urgent financing needs.
  - Next steps include holding an Article IV consultation mission to assist in developing a broader macro and structural reform agenda to support debt and external sustainability.
  - IMF financial engagement expected to play a catalytic role in securing external grants and concessional financing.

*Source: IMF staff report (selected excerpts).*

### 33. Staff supports the authorities’ request for a disbursement of SDR 53.9 million (equivalent

### 33. Staff supports the authorities’ request for a disbursement of SDR 53.9 million (equivalent to 35 percent of quota) under the exogenous shock window of the Rapid Credit Facility

### Disbursement request and staff rationale
- Staff supports a disbursement of SDR 53.9 million (equivalent to 35 percent of quota) under the exogenous shock window of the Rapid Credit Facility.
- Support is based on:
  - The immediate and urgent balance of payments needs generated by the COVID-induced exogenous shock.
  - The COVID shock having exacerbated external sustainability challenges.
  - The authorities’ existing and prospective policies in response to the external shock and balance of payments difficulties.
- Staff supports that the disbursement be on-lent for budget support to:
  - Provide space for interventions needed to mitigate the severe socio-economic impact of the pandemic.
  - Allow a more gradual policy adjustment than would otherwise be necessary.

### Assessment of debt sustainability and Fund repayment capacity
- Burundi debt is assessed to be sustainable but at high risk of distress.
- Burundi’s capacity to repay the Fund remains adequate.

### Key recent developments and vulnerabilities (selected indicators drawn from staff tables and figures)
- Fiscal and public debt:
  - Overall balance (percent of GDP): -6.7 (2018), -6.2 (2019), -6.5 (2020), -6.1 (2021), projections to -1.7 (2026).
  - Public gross nominal debt: 53.0 (2018), 60.3 (2019), 59.7 (2020), 61.5 (2021), projected 56.2 (2026) (percent of GDP).
  - Excluding grants, fiscal deficit: -10.6 (2018), -10.2 (2019), -11.0 (2020), -10.4 (2021), projected -7.8 (2026) (percent of GDP).
- Output, prices, and external:
  - Real GDP (annual percent change): 1.6 (2018), 1.8 (2019), 2.1 (2020), -1.0 (2021), projected 2.1 (2022) and 4.2 (2023) (annual percent change).
  - Current account balance (incl. grants, percent of GDP): -11.4 (2018), -11.6 (2019), -16.9 (2020), -10.4 (2021), projected -22.8 (2024) and -19.0 (2026).
  - Gross international reserves (US$ millions): 70.3 (2018), 113.4 (2019), 113.4 (2020), 94.3 (2021), projected 514.1 (2026).
- Monetary and financial indicators:
  - Broad Money (M2) growth (levels shown): 21.5 (2018), 23.4 (2019), 20.9 (2020), 24.8 (2021), projected 11.3 (2026).
  - Credit to non-government sector (levels shown): 12.8 (2018), 14.4 (2019), 7.8 (2020), 18.3 (2021), projected 13.1 (2026) (percent of GDP indicated in memo: 13.9, 15.5, 14.5, 18.0, 25.6 respectively).
  - Banking system nonperforming loans (percent of total gross loans): 9.2 (Dec 2018), 5.6 (Dec 2019), 6.6 (Mar 2020), 6.2 (Dec 2020), 4.8 (Mar 2021).
- Fund obligations and capacity indicators:
  - Outstanding Fund credit (SDR million): 45.8 (2018), 34.0 (2019), 18.1 (2020), 67.8 (2021), projected 0.0 by 2031.
  - Total obligations based on existing and prospective credit (SDR million, incl. CCRT): 12.6 (2018), 11.9 (2019), 2.5 (2020), 0.0 (2021), projected 10.8 (2027) and thereafter recurring.
  - Net use of Fund credit (SDR million): -12.5 (2018), -11.8 (2019), -2.2 (2020), 53.9 (2021), projected -10.8 (2028 onward, recurring).

### Risks and outlook
- Risks to the outlook are tilted to the downside.
- Key vulnerabilities noted:
  - Critically low reserves following the 2015 crisis that have only partially recovered.
  - Persistent and large current account deficits and elevated fiscal deficits, especially excluding grants.
  - High risk of debt distress despite current sustainability assessment.

### Policy implications and recommended use of Rapid Credit Facility disbursement
- The on-lent disbursement for budget support is recommended to:
  - Mitigate the severe socio-economic impact of the pandemic.
  - Provide room for a more gradual fiscal adjustment to preserve social spending and priority interventions.
- Continued monitoring of external financing flows, reserve positions, and debt-service obligations is implied by staff’s assessment of high risk and downside risks.

*Source: IMF staff report excerpt (Burundi): staff supports a disbursement of SDR 53.9 million under the Rapid Credit Facility; selected tables and figures as provided in the source content.*

### Annex I. Risk Assessment Matrix

### Annex I. Risk Assessment Matrix

### Domestic Risks: sources, likelihood, impact, and policy responses
- Reengagement with the international community
  - Likelihood: High
  - Expected impact on economy: High. Much stronger support from the international community will ease fiscal constraints by providing resources to the budget and funding for the National Development Plan. Strengthening international cooperation will provide the country with highly-needed FX and help covering the large BOP financing needs. The reengagement will support reform design and implementation, hence a much more ambitious reform agenda.
  - Policy response:
    - Accelerate engagement with the international community.
    - Not delaying essential structural reforms where profound disequilibrium/distortions have been identified.
    - Continue improving the political and social situation; facilitate the return of refugees.
    - Transparency and accountability in economic policies especially on the public spending side.

- Adverse weather conditions
  - Likelihood: Low
  - Expected impact on economy: Short Term. Medium. This would lead to lower agricultural production and slower growth, an increase in food inflation, pressures on public spending and the current account, and adversely affect the vulnerable households.
  - Policy response:
    - Guard against second-round effects on inflation.
    - Use targeted programs to help vulnerable groups and reprioritize spending.
    - Increase fiscal space through domestic revenue mobilization measures and spending prioritization and efficiency.
    - Strengthen the business environment to further diversify the economy, including exports.

- Deterioration of the political and security situation
  - Likelihood: Low
  - Expected impact on economy: Short to Medium Term. Medium. General social unrest would disrupt economic activities and reduce investors’ confidence. Increased pressures on fiscal expenditures (including military spending) would divert resources away from growth-enhancing spending, lowering growth.
  - Policy response:
    - Allow automatic fiscal stabilizers to operate.
    - Support the vulnerable population with well-targeted measures.
    - Assuming the turbulence is temporary, use fiscal space and monetary policy prudently to support the economy.

### Conjunctural shocks and scenarios: likelihood, impact, and policy responses
- Uncontrolled Covid-19 local outbreaks and subpar/volatile growth in affected countries
  - Likelihood: Medium
  - Expected impact on economy: Medium. A further worsening situation of the pandemic would have severe economic and social impacts in Burundi. With limited medical capacity, fiscal space, and access to vaccines, Burundi is vulnerable to such a shock.
  - Policy response:
    - Adopt and accelerate the implementation of a national vaccination framework.
    - Prioritize spending towards the health sector and social protection.

- Widespread social discontent and political instability
  - Likelihood: Medium
  - Expected impact on economy: High. General social unrest would disrupt economic activities and reduce investors’ confidence. Increased pressures on fiscal expenditures (including military spending) would divert resources away from growth-enhancing spending, lowering growth.
  - Policy response:
    - Support the vulnerable population with well-targeted measures.
    - Assuming the turbulence is temporary, use fiscal space and monetary policy prudently to support the economy.

- Rising commodity prices amid bouts of volatility (upside risks)
  - Likelihood: Medium
  - Expected impact on economy: High. Higher primary goods prices (other than oil) would boost the country’s FX reserves and help in covering Covid related imports. It would provide greater effectiveness to the monetary policy and improve fiscal situation.
  - Policy response:
    - Run disciplinary fiscal policy to contain domestic absorption and preserve FX reserves. This would give more room to face future shocks.

### Structural Risks: likelihood, impact, and policy responses
- Intensified geopolitical tensions and security risks
  - Likelihood: Medium
  - Expected impact on economy: Medium. The higher commodity prices could boost commodity exports and support economic growth and reserve build up. Disorderly migration and lower confidence could lead to high public spending on refugees and lower private consumption and investment.
  - Policy response:
    - Increase fiscal space through stronger revenue administration and spending framework to better support unforeseen spending obligations.
    - Increase international reserve buffers with a more flexible exchange rate to provide an adequate response to foreign exchange needs of the economy.
    - Implement a more accommodative monetary policy if inflation is in check.

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### Annex II. Growth Dynamics in Burundi

### A. Pre-COVID drivers of growth (summary)
- Agriculture was the main driver of growth in 2019; performance historically unstable due to conflicts.
- Dominant subsistence agriculture, coffee and tea, forestry, livestock and fishing experienced retrenchment prior to 2010, recovery in 2010-14, setback in 2015 due to political crisis, and stronger contribution in 2019 from above-average harvests and herd restocking.
- Secondary sector contribution mixed; manufacturing and construction dominated but construction contracted sharply during 2015-2018. Manufacturing recovered in 2019 while construction remained a drag.
- Services have generally been the main contributor to growth except in 2019; from 2005-2009 government expenditure surged (partly donor-financed), services drove growth 2010-2014, but public services and market services flattened by 2019; COVID-19 exacerbated the downward trend.

### B. Growth-supporting policies
- Agricultural Programs
  - The agricultural sector contributes on average 39.7 percent of GDP, employing 84 percent of the labor force.
  - Plan National d’Investissement Agricole (PNIA, 2016−2020) supports agricultural production with measures including:
    - Production measures: (i) utilization of better-quality seeds; (ii) better access to fertilizers and at lower costs; (iii) better global-to-local price transmission increasing producer prices; (iv) gradual production mechanization and modernization; (v) professional training; (v i) expansion of land utilization for agricultural production; and (vi) increased financing, including for women.
    - Coffee sector reforms: reorganization to support exports, centralizing coffee sales and nationalizing part of the exports process. The BRB extended a loan to the Government in 2020 to invest in boosting productive capacity expected to increase production and reduce waste, boosting exported coffee volumes in 2021 and beyond.
    - Fertilizers: BRB extended a loan to expand production capacity of a fertilizer firm, guaranteed by the Treasury.
- Import Substitution
  - PND aims to reduce import dependence by boosting domestic production through modernization and diversification of agricultural production, increased electricity supply (new power plants), and support to agrobusiness industries.
- Banking
  - Banking Act updated (Law n°1/17 of August 22, 2017) to increase credit provision and improve banking regulation. Only reporting institutions (banks, microfinance institutions, and financial institutions) can grant credit; prohibition for non-reporting persons to carry out credit transactions. The Act leverages digital technology for online and mobile banking.

---

### Appendix I. Key points from the Letter of Intent (October 5, 2021)

- Purpose: Request financial assistance from the IMF under the Rapid Credit Facility (RCF) to support government efforts in managing the COVID-19 pandemic and limiting economic and social impacts.
- Acknowledgement: The Government thanks the IMF for three tranches of debt relief approved under the Catastrophe Containment and Relief Trust (CCRT) amounting a total of SDR 14.46 million.
- COVID response financing:
  - Government’s COVID response plan estimated at US$ 150 million, including a sanitary Contingency Plan for a cost of approximately US$ 58 million.
  - Actions: hygiene measures (subsidizing soaps and water), activation of a reception center for public health emergencies and COVID-19 coordination mechanism, equipping specialized laboratories with diagnostic equipment, test kits and reagents, protecting and training health personnel.
- Economic impact summary:
  - Growth: initially projected at 4.1 percent in 2020 before COVID; finally projected at -0.5 percent in 2020, mainly due to slowdown of the tertiary sector. Resilience of the primary sector aided by favorable climatic conditions and agricultural reforms.
  - Social measures: four main social protection projects and multiple health and education projects implemented; creation of the Women’s Bank and the Youth Bank.
  - Budget effects: current expenditure increased in 2020 while capital spending was under-executed; overperformance of revenue mobilization but higher spending led to deterioration of the overall budget deficit and significant increase in total public debt, especially domestic debt.
  - Balance of payments: current account improved slightly in 2020 compared to 2019 despite increased goods trade deficit; workers’ remittances increased in 2020; capital and financial accounts improved slightly due to grants and reduced deficit in other investments.
  - External position: net international reserves negative and deteriorated in 2020. Official reserves fell from 3.4 percent of GDP to 2.8 percent of GDP between 2019 and 2020. At end-December 2020 official reserves represented 1.1 months of the imports of goods and services of 2019. They fell to 0.8 month of imports of goods and services of 2020 in May 2021, lower than the East African Community convergence criterion (minimum of 4.5 months of imports), and have since been bolstered by the new SDR allocation (SDR 147.6 million, equivalent to US$ 211 million).
- 2021/22 budget and priorities:
  - An initial envelope of BIF 70.4 billion allocated for further execution of the COVID-19 response plan.
  - 2021/22 budget prioritizes spending in line with the National Development Plan 2018-2027 and the Peace Capitalization Program - Social Stability - and Promotion of Economic Growth (PNCP-SS-PCE), emphasizing (i) agriculture and livestock, (ii) public health, (iii) industrialization, (iv) economic and social infrastructure, and (v) employment of young people and social protection of the vulnerable.
  - Monetary and exchange rate policies constrained by limited international reserves; reengagement with the IMF expected to contribute to creating space to support the Bank of the Republic of Burundi.
- Medium-term coordination and reform:
  - Emphasis on strong coordination among fiscal, monetary, and sectoral policies compatible with government plans.
  - Continued reforms in rational management of public finances; IMF recommendations and technical assistance to be considered.
  - Request for further informal technical discussions with IMF experts on policies to resolve balance of payments difficulties.

*Source: Annex I. Risk Assessment Matrix and accompanying sections from the provided IMF document.*

### 11. This letter motivates a disbursement under the rapid credit facility for Burundi to support the

### BURUNDI REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY—DEBT SUSTAINABILITY ANALYSIS

### Purpose of the RCF disbursement
- Motive: support initiatives by the Government of Burundi to deal with the pandemic and support the resilience of the Burundian economy; support economic and financial policies in favor of macroeconomic stability and sustained and inclusive growth.
- Commitment: Government renews commitment to hosting an IMF Article IV consultation mission as soon as feasible.
- Debt and transparency commitment: similar to CCRT debt relief following COVID-19, Government reiterates a firm commitment to guarantee transparency in the use of RCF resources and allow easy access to monitoring and evaluation bodies for fund management.

### Disbursement modalities and accountability
- Requested emergency financing: SDR 53.9 million or the equivalent of 35 percent of our quota.
- Use of funds: disbursed as direct budget support to the national treasury account at the BRB.
- Memorandum of understanding: signed between the National Treasury and the BRB on respective responsibilities for servicing financial obligations to the IMF.
- Reporting and audit commitments:
  - Semi-annual reports on the execution of RCF resources will be produced and sent to the Court of Auditors for audit with a copy to the IMF within one month after the end of each semester.
  - Audited reports will be published on the website (www.finances. gov.bi) of the Ministry of Finance, Budget and Economic Planning within three months after each semester.
  - Information on ultimate beneficiary ownership of companies awarded COVID-related contracts will be collected starting in end-December 2021.
- Safeguards policy compliance:
  - Continue providing IMF staff with the BRB's external audit reports and the most recent management letters.
  - Host a safeguards assessment mission as soon as possible and implement IMF staff’s recommendations.

### Policy assurances and consultations
- Fiscal and monetary stance: maintain macroeconomic balances and debt sustainability through a prudent fiscal policy, monetary and financial policies contingent to current economic conditions, and reforms conducive to balanced, sustained, and stable growth to reduce poverty and preserve macroeconomic stability.
- Donor cooperation: intend to further strengthen technical and financial cooperation with key donors.
- Consultation commitment: intend to consult with the IMF before introducing new or revised measures that could affect payment and transfer arrangements or bilateral payments under Article VIII.

### Debt sustainability assessment — headline judgments
- Risk ratings:
  - Risk of external debt distress: High
  - Overall risk of debt distress: High
- Granularity in the risk rating: Sustainable
- Application of judgment: No
- Approval: Approved by Dhaneshwar Ghura and Anna Ilyina (IMF) and Marcello Estevão and Asad Alam (IDA).
- DSA prepared jointly by IMF and IDA staff using the debt sustainability framework for low-income countries.
- Date: October 6, 2021

### Key findings from the DSA
- Overall assessment:
  - Two external debt burden indicators and one overall public debt indicator breach respective thresholds under the baseline, signaling high risk for external and overall public debt.
  - The breach in the PV of the public debt-to-GDP ratio is significant and protracted.
  - Breaches in external debt indicators under the baseline are mild and fall below but near the threshold in the medium term.
- Vulnerabilities:
  - External debt sustainability is particularly vulnerable to shocks to exports.
  - Overall public debt sustainability is most vulnerable to shocks to real GDP growth.
- Staff conclusion:
  - Staff assesses Burundi’s debt as sustainable based on authorities’ commitment to fiscal consolidation from unwinding of COVID-related spending, moderate improvement in revenue collection, expectations of donor financing, and a positive macroeconomic outlook including robust exports and GDP growth.
  - High likelihood Burundi will meet current and future obligations given assumptions and good track record in servicing debt.
  - Significant risks: delays in fiscal consolidation, delays in structural reforms to boost exports and growth, lack of up-to-date information on arrears, and a prolonged COVID-19 shock would heighten vulnerabilities.
- Mitigating factors:
  - New SDR allocation: SDR 147.6 million equivalent to 6.6 percent of GDP, which mitigates debt vulnerabilities.
  - Prospects for re-engagement with international community and availability of grants/concessional loans for high-return projects would be beneficial.
  - Greater exchange rate flexibility and reforms to enhance competitiveness would improve growth outlook.

### Public debt coverage and contingent liabilities
- Coverage: central government external and domestic debt; data limitations prevent expanding coverage to other general government entities or SOEs.
- Contingent liability assumptions and specifics:
  - Central bank contracted a government-guaranteed loan of $40 million (3-year maturity) in December 2019, with a remaining balance of US$ 35 million (1.1 percent of GDP) at end-2020.
  - Potential domestic arrears accumulated since 2018 assumed at 1.4 percent of GDP at end-2020.
  - Contingent liabilities on SOEs’ debt set at default value of 2 percent of GDP.
  - Financial markets contingent liabilities default value set at 5 percent of GDP (slightly less than 10 percent of Burundi’s commercial banks’ liabilities).
  - Overall total contingent liabilities assumed at about 9.5 percent of GDP.

### Debt developments and composition (selected figures)
- Historical change:
  - Public debt rose from 38 percent of GDP at end-2014 to 67 percent of GDP at end-2020.
  - Domestic debt nearly tripled from 17.4 percent of GDP at end-2014 to 49 percent of GDP at end-2020.
  - External debt fell from 20.6 percent of GDP at end-2014 to 18 percent of GDP at end-2020.
- External debt by creditor at end-2020 (Nominal, Millions of US dollars; Percent of Total; Percent of GDP):
  - Total Debt: 538.7; 100.0; 18.0
  - Multilateral: 401.3; 74.5; 13.4
  - World Bank (IDA): 135.3; 25.1; 4.5
  - OPEC Fund: 86.6; 16.1; 2.9
  - AFREXIM loan (central bank, government-guaranteed): $40 million contracted in 2019; remaining balance US$ 35 million (1.1 percent of GDP) at end-2020.
  - Debt to the IMF at end-2020: US$ 26.0 (0.9 percent of GDP), serviced by the central bank.
- Grant element:
  - Burundi’s outstanding external debt at end-2020 retains a substantial grant element of 33 percent.
- Arrears:
  - Burundi is current on servicing external debt (except the debt to Libya).
  - Stock of domestic arrears is unknown; domestic arrears accumulated from 2005 to 2017 (about BIF 230 billion or about 4 percent of 2020 GDP) were cleared through cash payments and securitization.

### Macroeconomic forecast assumptions and projections
- Data sharing: authorities resumed data sharing in 2020; weaknesses in official data remain.
- Baseline growth path:
  - GDP growth projected to recover to 1.6 percent in 2021, predicated on a slowdown of the pandemic in the fourth quarter of 2021.
  - Medium-term growth: pick up to around 5 percent supported by stronger services, agricultural and manufacturing production, and investment.
- Risks to 2021 growth:
  - Accelerated surge of COVID-19 cases, social distancing measures abroad, and border closures could keep services growth anemic.
  - Floods and landslides in Q2 2021 expected to hamper agricultural production.
- External accounts and financing:
  - A large external financing gap is projected in 2021 and beyond.
  - Current account deficit expected to widen in 2021 driven by higher imports due to COVID-related needs and easing of import restrictions as the SDR allocation supports additional FX availability, and worsening terms of trade owing to increases in import prices (especially petroleum).
  - Export volumes expected to recover mildly in 2022 with mining exploitation restarting after contract negotiations end.
  - Capital and financial account supported by sizeable project grants, public sector borrowing and private borrowing (trade credits).
- Vaccination assumptions and costs:
  - Baseline assumes vaccination of 56 percent of the population by the first half of 2022.
  - Government would pay for vaccination of 40 percent of the population at a cost of $1.8 million per percentage point of the population.
  - Remaining 16 percent to be vaccinated under the COVAX initiative.
- Reserves:
  - With the recent SDR allocation, FX reserves are projected to increase to about 2.5 months of imports in 2021 under the baseline, which is still below adequacy levels.

*International Monetary Fund and International Development Association, Joint Bank-Fund Debt Sustainability Analysis for Burundi, October 6, 2021.*

### 12.      The main changes compared to the 2015 DSA are as follows (Box 1 and Text Table 5):

### 1bdiea2021001 - 12.      The main changes compared to the 2015 DSA are as follows (Box 1 and Text Table 5):

### Real sector
- Projected real GDP growth revised down versus the 2015 DSA.
- March 2015 DSA projection: average annual real GDP growth of 6.1 percent during 2015-34.
- Current DSA projections:
  - growth increases from an annual average of 3.3 percent during 2020-25 to an annual average of 4.1 percent during 2026-41.
  - Yearly values shown in Text Table 5 (Current DSA): 2.8, 3.3, 4.1, 4.2, -3.9, -0.6, 0.5, 1.6, 1.8, -1.0, 1.6, 4.2, 4.7, 4.9, 5.2, 4.8.
- Drivers of the lower growth rate: weaker initial macroeconomic conditions (lingering effects of the 2015 crisis and diplomatic isolation), adverse impacts from the Covid-19 pandemic, and only a moderately positive impact from policies under the current baseline.
- Medium-term peak and long-term settling (Box 1):
  - Growth expected to peak at around 5.2 percent in the medium-term and settle at around 4 percent in the long-term.
  - Growth projected to turn positive in 2021 and increase to around 5.2 percent by 2025.

### Fiscal sector
- Primary fiscal balance path in the current DSA projected to be slightly worse than in the 2015 DSA due to lingering impacts of the 2015 political crisis on government policies and donor support.
- Expected fiscal adjustment and reforms are projected to raise the primary fiscal balance from an annual average of -1.7 percent of GDP during 2020-25 to an annual average of 1.2 percent of GDP during 2026-41.
- Primary fiscal deficit expected to worsen in FY2021/22 mainly because of COVID-related spending, including on vaccines (3.3 percent of GDP).
- Baseline assumes significant fiscal adjustment starting in FY2022/23 because:
  - spending pressures related to COVID-19 subside,
  - revenue collection improves owing to stronger growth, widening of the tax base and administrative measures (better enforcement and computerization),
  - budget support increases,
  - subsidies remain contained to provide greater room for domestically-financed public investment.
- Text Table 6 (selected fiscal items, percent of GDP) – row highlights (2019/2020 est. through projections):
  - Revenue and grants: 1.9, 1.0, 1.5, 0.7, 0.1, 0.1, 0.0, 0.1, 0.1, 0.1, 0.1, 0.1
  - Tax revenue: 1.2, 1.0, 0.1, 0.2, 0.0, 0.0, 0.0, 0.0, 0.0, 0.1, 0.1, 0.1
  - Grants: 0.3, 0.1, 1.1, 0.5, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0
  - Total expenditure: 1.9, 1.9, 0.9, -2.5, -1.0, -0.1, -0.1, -0.1, -0.1, -0.1, -0.1, -0.1
  - Expense: 2.5, 1.8, -1.1, -2.6, -0.9, -0.1, -0.1, -0.1, -0.1, -0.1, -0.1, -0.1
  - Net acquisition of nonfinancial assets: -0.6, 0.0, 2.0, 0.1, -0.2, 0.0, -0.1, -0.1, 0.0, 0.0, 0.0, 0.0
  - Net lending (+) / borrowing (-): 0.1, -0.8, 0.6, 3.2, 1.1, 0.2, 0.2, 0.2, 0.2, 0.2, 0.2, 0.2
- Box 1 fiscal trajectory highlights:
  - Tax revenue expected to rise from 16.2 percent of GDP in FY2019/20 to almost 18.5 percent of GDP in the long term.
  - Grants expected to rise from 4.3 percent of GDP in FY2019/20 to 6.5 percent of GDP in the long term.
  - Current spending projected to drop from 20.4 percent of GDP in FY2019/20 to about 16.2 percent of GDP in the long term.
  - Capital spending projected to increase from 7.9 percent of GDP in FY2019/20 to close to 10 percent of GDP in the long term.
  - Fiscal balance projected to improve from a deficit of 6.1 percent of GDP in FY2019/20 to a surplus of about 1.3 percent of GDP by 2041.
  - Public debt projected to peak at 71.9 percent of GDP in 2021 before starting a gradual descent.

### External sector and financing
- Non-interest current account balance path in the current DSA slightly less favorable than in the 2015 DSA with a slightly higher deficit, mainly due to much higher imports of goods and services.
- Export growth adversely affected by the 2015 political crisis, COVID-19, and regulatory changes in key export markets (enforcing repatriation of export proceeds).
- Export growth expected to pick up medium and long term owing to good performance of traditional exports (coffee and tea) and mining expansion, especially gold.
- External financing assumptions:
  - Near-to-medium term: external financing assumed to pick up.
  - Long term: domestic borrowing projected to finance most of the declining fiscal deficit.
  - Multilateral and regional lenders, including the IMF, projected to account for most external borrowing in 2021 (82.4 percent), with loan maturity varying between 10 and 30 years and grant elements varying between 27.5 percent to 49.4 percent.
  - Non-Paris Club bilateral creditors assumed to increase lending over time, with loan maturities varying from 20 to 30 years and grant elements varying between 29.8 and 49.4 percent.
  - In absence of full reengagement, staff’s baseline projections of external disbursements are conservative.
- Financing composition (FY2021/22 to FY2026/27):
  - Domestic sources projected to finance an increasing portion of the fiscal deficit, from about 54.5 percent of the fiscal deficit in FY2021/22 to 100 percent by FY2026/27, when net external borrowing becomes nil and later negative as repayments start exceeding disbursements.
- Domestic financing assumptions:
  - Instruments: treasury bills and bonds with maturities varying from less than one year to more than seven years.
  - Interest rates: varying from 3 to 7.5 percent.

### Disbursements: staff projections vs. potential (Text Table 7)
- Loans (Projects) projected disbursements (staff), 2021-2030: 3.5, 1.0, 1.0, 0.9, 0.8, 0.8, 0.7, 0.7, 0.6, 0.4
- Loans (Projects) potential disbursements (authorities), 2021-2025: 6.8, 3.8, 2.6, 1.9, 0.1
- Grants (Projects) projected disbursements (staff), 2021-2030: 5.6, 5.3, 5.5, 5.6, 5.5, 5.5, 5.5, 5.5, 5.5, 5.5
- Grants (Projects) potential disbursements (Dev. Partners), 2021-2022: 7.2, 6.1
- Memorandum items:
  - GDP at current market prices in billions of Burundi Francs (2019-2030): 6,265.8; 6,837.6; 7,479.7; 8,192.1; 8,991.8; 9,851.7; 10,753.1; 11,694.3; 12,694.9; 13,763.9
  - GDP at current market prices in billions of US$: 3.2; 3.4; 3.6; 3.9; 4.2; 4.5; 4.8; 5.1; 5.4; 5.8

### Medium-to-long term macro forecasts (Box 1 key points)
- Growth:
  - Peak around 5.2 percent in medium-term, settle around 4 percent long-term.
  - Recovery stalled by pandemic in 2020; projected V-shaped recovery if virus containment and vaccination pick up.
  - Primary sector remains a stable basis; tertiary and secondary sectors expected to become main drivers.
- Inflation:
  - After an uptick in 2020, annual inflation expected around 4.2 percent in the medium term.
  - Food items represent 45 percent of the consumption basket.
- Fiscal structure and public finances (see Fiscal sector bullets above).
- External sector:
  - Current account deficit expected to remain large (above 18 percent of GDP).
  - Trade deficit large: increase from 19.6 percent of GDP in 2020 to about 24.2 percent of GDP in the long term.
  - Transfers decline from 13.7 percent of GDP in 2020 to 9.8 percent of GDP in the long term.
  - Current account deficit worsens from 10.4 percent of GDP to 20.4 percent of GDP in the long term.
  - Financing of current account deficit mainly via strong project grants (rising from 4.5 percent of GDP in 2020 to about 6 percent of GDP in the long term) and public and private sector borrowing, including trade credits.

### Debt dynamics, realism tools, and risks
- Realism tools:
  - Highlight sensitivity of external debt to the current account deficit, mainly due to weak exports.
  - Projected path of external debt in current DSA similar to 2015 DSA but slightly worse than 2013 DSA.
  - Large current account deficits financed mainly by project grants, public sector borrowing, and private non-FDI inflows, including trade credits; FDI inflows modest.
  - Realism tools highlight sensitivity of total public debt to the primary fiscal deficit and GDP growth.
- Historic deviations:
  - DSAs in 2013 and 2015 projected gradually declining public debt burdens; those projections did not materialize.
  - Instead, external debt burden grew somewhat, and total debt burden grew rapidly driven by higher than expected fiscal deficits and lower than expected growth.
- Debt trajectory:
  - Debt relative to GDP expected to keep growing to reach its peak at the end of 2021 before starting a gradual downward path.
- Realism tool assessments of planned fiscal adjustment (Fig. 4 referenced):
  - Projected fiscal adjustment over next three years is in the top quartile of fiscal adjustments.
  - The adjustment partially reflects anticipated winding down of pandemic impacts on government spending.
  - Tool for consistency between fiscal adjustment and growth: not well suited to account for pandemic impact; sharp 2020 decline and projected V-shaped recovery in 2021 unrelated to fiscal adjustment.
  - Consistency between public investment and growth: increase in public investment will support projected growth, though with a lower contribution than in the past; increasing private investment expected to contribute positively versus negative contribution observed previously.
- Risks to baseline:
  - Upside: full reengagement with international community (not reflected in baseline) could significantly boost external grants and concessional financing, facilitating fiscal consolidation and growth-enhancing public investment; baseline grant projections are conservative.
    - Historical context: grants averaged 17.7 percent of GDP per year during 2010-14 before the 2015 crisis.
    - Budget support averaged 3 percent of GDP per year during 2010-14; some budget support (0.5 percent of GDP) projected starting in 2022 upon normalization of relations.
  - Downside: greater or more prolonged domestic spread of COVID-19, delays in vaccine rollout, scaring domestic and global effects of the pandemic, further climate shocks, deterioration of political and security situation, and slow pace of reform affecting growth and donor financing.

### Country classification and debt-carrying capacity
- Debt-carrying capacity classification: Weak (same as March 2015 DSA).
- Composite indicator (CI): 1.95, based on April 2021 WEO data and 2019 CPIA scores.
- Applicable thresholds under weak capacity:
  - PV of external public debt-to-GDP ratio: 30 percent
  - PV of public external debt-to-exports ratio: 140 percent
  - Debt service-to-exports ratio: 10 percent
  - Debt service-to-revenue ratio: 14 percent
  - Benchmark for PV of total public debt: 35 percent of GDP
- Final classification: Weak (score 1.95).  

*Source: IMF staff estimates and projections as presented in the DSA text unit (Text Tables and Box 1).*

### 19.      Stress tests use standard settings, except the contingent liabilities stress test. Both

### 19.      Stress tests use standard settings, except the contingent liabilities stress test. Both

### Stress test settings
- Bound tests and tailored tests on commodity prices use the default settings.
- The contingent liabilities stress test:
  - Accounts for a recent loan contracted by the central bank that the government guarantees but that will still be serviced by the central bank itself.
  - Accounts for potential domestic arrears accumulated since 2018.

### A. External Debt Sustainability: Signals from the Model
- Overall risk finding:
  - Burundi’s risk of external debt distress is high.
- Indicators and thresholds:
  - Two indicators breach the respective thresholds under the baseline.
  - The PV of external debt to GDP is relatively low and remains under its threshold under the baseline and shock scenario.
  - The PV of external debt-to-exports ratio exceeds its threshold for 2021.
  - The ratio of external debt service-to-exports exceeds its threshold in 2022 and in 2027 when repayment of the expected RCF loan starts; it remains below, but near the threshold thereafter.
- Vulnerabilities from stress tests:
  - External debt sustainability is particularly vulnerable to shocks to exports and non-debt flows, including transfers and FDI.
  - A shock to exports or non-debt flows of the standard size would result in much larger and even more protracted breaches of the thresholds for the PV of external debt-to-exports and external debt service-to-exports ratios than seen in the baseline.
- Note:
  - The most extreme stress test is defined as the test that yields the highest ratio on or before the tenth year of the projection period.

### B. Public Debt Sustainability: Signals from the Model
- Overall risk finding:
  - Burundi’s overall risk of debt distress is high.
- Indicators and thresholds:
  - The PV of the public debt-to-GDP ratio breaches its threshold under the baseline scenario.
  - The breach is declining but remains above the threshold throughout the projection horizon.
  - The decline in the PV of public debt to GDP below the threshold of 35 percent after 2031 is predicated on sustained growth and fiscal consolidation assumed in the baseline.
- Vulnerabilities from stress tests:
  - Public debt sustainability is particularly vulnerable to shocks to GDP growth.
  - A standard shock to growth would leave the public debt-to-GDP ratio well above the threshold beyond the end of the projection horizon.
- Judgment:
  - Judgment is not applied to override the mechanical risk ratings.

### Conclusion: Risk Rating and Vulnerabilities
- Risk ratings and rationale:
  - This DSA finds that Burundi is at high risk of external and overall debt distress.
  - The finding results from mechanical risk signals on external and overall public debt burden indicators, and staff sees no reason to override these signals using judgment.
- Main vulnerabilities:
  - External debt: shocks to exports and non-debt flows.
  - Overall public debt: shocks to growth.
- Policy and reform implications:
  - Reforms to boost Burundi’s export and growth performance would address vulnerabilities.
  - Normalization of relations with donors and associated increase in financial support would reduce vulnerabilities and reduce the need for, and facilitate, fiscal adjustment.
  - Retirement of domestic debt prior to maturity using donor funding and grants once the authorities reengage with donors could address the breach of the PV of debt-to-GDP driven mainly by domestic debt.
  - Prospects of a more ambitious reform agenda, notably in relaxing FX restrictions, would help alleviate growth bottlenecks and improve the debt-to-GDP path.
- Staff assessment of sustainability:
  - Staff assesses Burundi’s debt as sustainable based on the authorities’ commitment to re-engagement with the international community, fiscal consolidation, expectations of donor financing, and a positive macroeconomic outlook including robust exports and GDP growth.
  - Given these assumptions and the country’s good track record in servicing its debt, there is a high likelihood that Burundi will be able to meet all its current and future financial obligations.
  - Resilient remittance inflows serve to lower the effective risks associated with the external debt liquidity indicators.
- Quantified mitigants:
  - The new SDR allocation: SDR 147.6 million equivalent to 6.6 percent of GDP.
- Risks to the assessment:
  - Delays in fiscal consolidation.
  - Slow implementation pace of structural reforms aimed at boosting exports and growth.
  - Lack of up-to-date information on arrears.
  - A prolonged COVID-19 shock.
  - Debt is vulnerable, especially to shocks to exports, non-debt flows, growth, and commodity prices.
  - Stronger GDP growth supported by prospects of stronger donor financing and the new SDR allocation (SDR 147.6 million equivalent to 6.6 percent of GDP) would mitigate debt vulnerabilities.

*International Monetary Fund — Burundi excerpt.*

### 28.      The authorities concurred that debt is sustainable but viewed staff projections as

### 1bdiea2021001 - 28.      The authorities concurred that debt is sustainable but viewed staff projections as

### Authorities' assessment and policy stance
- The authorities concurred that debt is sustainable but viewed staff projections as being overly conservative.
- They underscored that under the baseline, long-term exports growth does not account for the implementation of Burundi’s 2018–27 development plan (Plan National de Dẻveloppement) and reforms.
- Ongoing reforms discussed to boost growth and reduce the trade deficit include imports substitution policies to reduce bottlenecks induced by the limited FX availability.
- The authorities underscored their good track record in servicing debt and commitment to debt sustainability.

### External debt: baseline projections and key indicators (2018–41)
- External debt (nominal), in percent of GDP: 2018: 17.2; 2019: 18.3; 2020: 18.0; 2021: 20.4; 2022: 19.2; 2023: 18.0; 2024: 16.9; 2025: 15.9; 2026: 15.0; 2031: 10.0; 2041: 5.4 (and 19.9; 15.0 appear in table lines).
- Public and publicly guaranteed (PPG) external debt mirrors the external debt series in the table: 17.2; 18.3; 18.0; 20.4; 19.2; 18.0; 16.9; 15.9; 15.0; 10.0; 5.4; 19.9; 15.0.
- Change in external debt: 0.3; 1.1; -0.3; 2.3; -1.2; -1.1; -1.1; -1.0; -0.9; -0.9; -0.4.
- Identified net debt-creating flows (selected values): 12.2; 11.7; 10.0; 16.6; 21.7; 18.5; 18.1; 17.8; 18.1; 19.0; 20.0; 11.4; 18.6.
- Non-interest current account deficit: 11.3; 11.5; 10.2; 17.0; 22.6; 19.4; 19.1; 18.7; 18.9; 19.6; 20.4; 13.6; 19.3.
- Deficit in balance of goods and services (selected projections): 19.9; 23.8; 24.7; 32.5; 38.7; 35.1; 34.3; 33.4; 33.4; 33.1; 32.1; 30.3; 25.9; 33.6.
- Exports (percent of GDP): 2018: 9.9; 2019: 9.9; 2020: 8.9; 2021: 9.4; projections include 9.7; 9.9; 9.9; 10.1; 10.0; 10.1; 11.3.
- Imports (percent of GDP) (selected values): 29.8; 33.7; 33.6; 42.0; 48.4; 44.9; 44.2; 43.5; 43.1; 42.2; 41.7.
- Net current transfers (negative = inflow), percent of GDP: -8.3; -11.9; -13.7; -14.9; -15.4; -15.1; -14.6; -14.1; -13.7; -12.1; -9.8; -12.3; -13.7.
- Net FDI (negative = inflow): 0.0; 0.0; -0.2; -0.2; -0.2; -0.2; -0.2; -0.2; -0.2; -0.2; -1.5; -0.2.
- Endogenous debt dynamics (selected): 0.8; 0.2; 0.0; -0.1; -0.6; -0.7; -0.7; -0.7; -0.6; -0.3; -0.1.
  - Contribution from nominal interest rate: 0.1; 0.1; 0.2; 0.2; 0.2; 0.2; 0.2; 0.2; 0.1; 0.1.
  - Contribution from real GDP growth: -0.3; -0.3; 0.2; -0.3; -0.8; -0.8; -0.8; -0.8; -0.7; -0.4; -0.2.
  - Contribution from price and exchange rate changes: 1.0; 0.5; -0.4; ...
- Residual: -11.8; -10.6; -10.2; -14.2; -22.9; -19.6; -19.2; -18.8; -19.0; -19.9; -20.4; -11.8; -19.3.
- Sustainability indicators (selected):
  - PV of PPG external debt-to-GDP ratio (selected values): 11.9; 13.5; 12.9; 12.3; 11.6; 11.1; 10.5; 7.0; 3.8.
  - PV of PPG external debt-to-exports ratio (selected): 132.9; 143.5; 132.8; 124.8; 117.4; 110.0; 105.7; 69.5; 33.3.
  - PPG debt service-to-exports ratio (selected): 9.1; 8.7; 8.5; 6.8; 11.1; 10.1; 9.5; 8.3; 7.8; 9.1; 3.8.
  - PPG debt service-to-revenue ratio (selected): 5.8; 4.9; 4.1; 3.3; 5.6; 5.1; 4.9; 4.3; 4.0; 4.6; 2.1.
- Gross external financing need (Million of U.S. dollars): 370.6; 371.0; 325.4; 553.9; 796.3; 733.0; 770.7; 809.9; 874.0; 1,240.6; 2,299.8.
- Nominal GDP (Million of US dollars): 3,037; 3,012; 3,040; 3,193; 3,396; 3,637; 3,900; 4,192; 4,498; 6,133; 11,191.
- Nominal dollar GDP growth: -4.3; -0.8; 0.9; 5.0; 6.4; 7.1; 7.3; 7.5; 7.3; 6.2; 6.3; 4.3; 6.6.

### Public sector debt: baseline projections and key indicators (2018–41)
- Public sector debt (percent of GDP): 2018: 53.0; 2019: 60.0; 2020: 67.0; 2021: 71.9; 2022: 70.2; 2023: 66.5; 2024: 62.9; 2025: 59.5; 2026: 56.2; 2031: 41.7; 2041: 15.8; 42.3; 56.7 (table shows sequence).
- Of which: external debt (percent of GDP) repeats external series: 17.2; 18.3; 18.0; 20.4; 19.2; 18.0; 16.9; 15.9; 15.0; 10.0; 5.4; 19.9; 15.0.
- Change in public sector debt: 6.1; 7.0; 7.0; 4.9; -1.7; -3.7; -3.5; -3.5; -3.2; -2.7; -2.7.
- Identified debt-creating flows (selected): 6.1; 5.6; 4.5; 2.5; -1.3; -3.5; -3.4; -3.4; -3.3; -2.5; -2.7; 3.0; -2.3.
- Primary deficit (percent of GDP): 5.1; 4.1; 3.7; 4.7; 2.2; 0.0; -0.1; -0.2; -0.3; -0.9; -2.1; 4.1; 0.3.
- Revenue and grants (percent of GDP): 19.4; 22.4; 22.7; 25.3; 25.4; 25.5; 25.6; 25.6; 25.6; 26.1; 27.3; 24.4; 25.7.
  - Of which: grants: 3.9; 4.6; 4.2; 6.1; 6.0; 6.1; 6.1; 6.1; 6.1; 6.2; 6.5.
- Primary (noninterest) expenditure (percent of GDP): 24.4; 26.4; 26.4; 30.0; 27.6; 25.5; 25.5; 25.4; 25.3; 25.2; 25.2; 28.5; 26.0.
- Automatic debt dynamics (percent of GDP): 1.0; 1.5; 0.8; -2.2; -3.5; -3.5; -3.3; -3.2; -3.0; -1.5; -0.6.
  - Contribution from interest rate/growth differential: -0.2; 0.7; 1.0; -2.2; -3.5; -3.5; -3.3; -3.2; -3.0; -1.5; -0.6.
  - Contribution from average real interest rate (selected): 0.6; 1.6; 0.4; -1.1; -0.6; -0.3; -0.2; -0.1; -0.2; 0.2; 0.1.
  - Contribution from real GDP growth (selected): -0.7; -1.0; 0.6; -1.1; -2.9; -3.1; -3.1; -3.1; -2.7; -1.7; -0.7.
- Residual: 0.0; 1.5; 2.5; 2.4; -0.4; -0.2; -0.1; 0.0; 0.1; -0.3; 0.0; 1.4; 0.0.
- Sustainability indicators (selected):
  - PV of public debt-to-GDP ratio (selected): 61.0; 65.4; 64.2; 61.0; 57.9; 54.8; 52.0; 38.8; 14.3.
  - PV of public debt-to-revenue and grants ratio (selected): 269.2; 258.4; 252.4; 239.0; 226.3; 214.1; 202.6; 148.5; 52.3.
  - Debt service-to-revenue and grants ratio (selected): 60.0; 51.7; 60.3; 25.6; 41.1; 41.4; 45.7; 44.7; 47.7; 45.0; 17.7.
  - Gross financing need: 16.7; 15.6; 17.4; 11.2; 12.6; 10.6; 11.6; 11.2; 11.9; 10.8; 2.8.

### Key macroeconomic assumptions underlying projections
- Real GDP growth (in percent): 1.6; 1.8; -1.0; 1.6; 4.2; 4.7; 4.9; 5.2; 4.8; 4.0; 4.0; 1.6; 4.2.
- GDP deflator in US dollar terms (change in percent): -5.8; -2.6; 2.0; 3.4; 2.1; 2.3; 2.2; 2.2; 2.3; 2.1; 2.1; 2.7; 2.3.
- Effective interest rate (percent): 0.6; 0.6; 1.0; 1.0; 0.9; 0.9; 0.9; 1.0; 1.0; 1.2; 1.3; 0.6; 1.0.
- Growth of exports of G&S (US dollar terms, in percent): 11.1; -0.5; -9.2; 11.0; 9.8; 8.3; 8.0; 9.0; 6.3; 7.2; 7.7; 5.2; 7.8.
- Growth of imports of G&S (US dollar terms, in percent): 2.7; 12.3; 0.5; 31.2; 22.8; -0.7; 5.4; 5.8; 6.3; 5.9; 6.2; 2.0; 9.1.
- Grant element of new public sector borrowing (in percent): 34.3; 37.5; 37.5; 37.5; 37.5; 37.5; 37.5; 37.5; ...; 37.2.
- Government revenues (excluding grants, in percent of GDP): 15.5; 17.8; 18.4; 19.2; 19.4; 19.5; 19.5; 19.5; 19.6; 20.0; 20.8; 15.3; 19.6.
- Aid flows (Million of US dollars): 521.4; 543.2; 529.9; 203.0; 213.6; 229.4; 246.5; 264.1; 282.3; 386.7; 733.6.
- Grant-equivalent financing (in percent of GDP): 7.3; 6.4; 6.4; 6.4; 6.4; 6.4; 6.4; 6.4; ...; 6.5.
- Grant-equivalent financing (in percent of external financing): 75.8; 90.9; 91.4; 92.0; 92.5; 92.9; 94.7; 97.1; ...; 91.4.

### Stress tests, sensitivity analysis, and tail risks
- Table 3 and Table 4 present sensitivity analyses for key indicators of public and PPG external debt, 2021−2031:
  - Various alternative scenarios and bound tests include: A1. Key variables at their historical averages in 2021-2031; B1. Real GDP growth; B2. Primary balance; B3. Exports; B4. Other flows; B5. Depreciation; B6. Combination of B1-B5.
  - Tailored tests include: C1. Combined contingent liabilities; C2. Natural disaster (n.a. in many cells); C3. Commodity price; C4. Market Financing (n.a. in many cells).
- Thresholds and breaches:
  - Thresholds reported include 30 (PV of debt-to-exports, PV of debt-to-GDP), 14 (debt service-to-exports?), 10 (debt service-to-revenue), and other benchmarks.
  - The tables flag breaches with bold values (note in source: "A bold value indicates a breach of the threshold").
- Figure summaries:
  - Figure 1 and Figure 2 illustrate indicators of Public and Publicly Guaranteed External Debt under alternative scenarios, 2021–31, and indicators of public debt under alternative scenarios, 2021–31.
  - Figure 3 and Figure 4 present drivers of debt dynamics and realism tools (contributions of primary deficit, real interest rate, real GDP growth, price and exchange rate changes, government and private investment rates, and fiscal adjustment growth paths under different fiscal multipliers).

### Fiscal and financing context; Fund relations and support
- The authorities requested RCF support to help implement their national COVID-19 response plan; the need arises from urgent and significant fiscal and external financing gaps created by the health crisis.
- Relations with the IMF (as of August 31, 2021):
  - Quota: 154.00 SDR Million (100.00 percent).
  - Fund holdings of currency (Exchange Rate): 144.14 (93.60 percent).
  - Reserve Tranche Position: 9.90 (6.43 percent).
  - SDR Department net cumulative allocation: 221.45 SDR Million (100.00 percent); holdings: 153.93; 69.51.
  - Outstanding purchases and loans: ECF Arrangements: 13.90 (9.03 percent quota).
- Latest financial commitments (historical ECF arrangements and amounts drawn) are listed in the annex (ECF Jan 27, 2012 – Amount Approved 40.00; Amount Drawn 30.00; earlier ECFs show amounts approved and drawn).
- Projected payments to Fund (SDR Million; based on existing use of resources and present holdings of SDRs):
  - Forthcoming Principal and charges/interest: Principal 2021: 6.40; 2022: 4.50; 2023: 2.50; 2024: 0.50. Charges/Interest: 0.01; 0.04; 0.04; 0.04; 0.04. Total: 0.01; 6.44; 4.54; 2.54; 0.54 (table formatting in source).
- Implementation of HIPC Initiative:
  - Decision point date: Aug 2005. Assistance committed by all creditors (US$ Million): 832.60. Of which: IMF assistance (US$ million): 27.87 (SDR equivalent 19.28). Completion point date: Jan 2009.
  - Disbursement of IMF assistance (SDR Million): Assistance disbursed to the member 19.28; Interim assistance 0.26; Completion point balance 19.02; Additional disbursement of interest income 3.07; Total disbursements 22.35.
- Implementation of MDRI:
  - MDRI-eligible debt (SDR Million): 26.40. Financed by MDRI Trust 9.01; Remaining HIPC resources 17.39.
- Catastrophe Containment and Relief (CCR) Trust disbursements:
  - Jul 20, 2020: Amount Committed 5.48; Amount Disbursed 5.48.
  - Oct 02, 2020: Amount Committed 4.82; Amount Disbursed 4.82.
  - Apr 01, 2021: Amount Committed 4.16; Amount Disbursed 4.16.
- Safeguards assessment highlights:
  - Last assessment completed July 17, 2012. Main findings: need for legal reforms to strengthen BRB law; governance arrangements required significant strengthening (Board and Audit Committee oversights of foreign exchange reserves and audit mechanisms); control weaknesses in fiscal accounts relating to government payments remained to be addressed.
  - Follow-up: BRB recruited an international audit firm for a special audit covering June 30, 2011–March 31, 2012, evaluation of decree implementation on public expenditures management, and status of earlier special audit recommendations. Recommendation on legal reforms remains outstanding.
  - Authorities committed to undergo an update safeguards assessment, publish audited FY2020/21 financial statements of the BRB, and provide Fund staff with necessary audit reports prior to Executive Board approval of any subsequent arrangement.

### Summary of policy recommendations and reform priorities (as reflected by authorities)
- Implement the 2018–27 National Development Plan (Plan National de Dẻveloppement) and associated reforms to support exports growth beyond baseline projections.
- Pursue imports substitution policies to reduce bottlenecks induced by limited FX availability and to reduce the trade deficit.
- Continue to maintain timely debt servicing and preserve commitment to debt sustainability.
- Re-engage with international community and mobilize emergency financing (RCF) to address urgent fiscal and external financing gaps created by the COVID-19 pandemic and support the national COVID-19 response plan.

*Sources: Country authorities; and staff estimates and projections as presented in the provided IMF document.*

### 1. Our  Burundian  authorities  appreciate  the  constructive  discussions  held with  Fund staff  and

### 1bdiea2021001 - 1. Our  Burundian  authorities  appreciate  the  constructive  discussions  held with  Fund staff  and

### Authorities' stance and request for IMF support
- Broadly agree with policy priorities and key recommendations in the staff report.
- Seek emergency financing under the Rapid Credit Facility (RCF) in the amount of SDR 53.9 million (equivalent to 35 percent of quota).
- The requested support is described as essential to bolster efforts aimed at moderating the socio-economic fallout from the pandemic.
- Capacity to repay the Fund is assessed as adequate; public debt is assessed as sustainable.
- Authorities hope IMF support will catalyze complementary financing to close the financing gap and better stabilize the economy.
- Committed to transparent and accountable use of pandemic-related resources:
  - Prepared a report on COVID-19 spending during 2020/21, being audited by the “Cour des Comptes”.
  - Will prepare bi-annual reports on COVID-19 spending and publish them on the Ministry of Finance website.
  - Committed to collecting and publishing information on the ultimate beneficial ownership of companies awarded COVID-19 related contracts.
  - Well on course to fulfill commitments under the CCRT debt relief audit.

### Impact of the COVID-19 pandemic
- Epidemiological developments:
  - First case reported on March 31, 2020.
  - By mid-July 2021, the number of new cases surpassed 1,000 cases per week.
  - As of October 14, 2021, the number of recorded cases had reached 19,513, with 14 fatalities.
  - Risks remain elevated with resurgence and more virulent waves affecting neighboring countries.
- Macroeconomic and social effects:
  - Economic activity contracted by 1 percent in 2020 due to slowdown in secondary sectors and services (hospitality, commerce, transportation).
  - Inflation rose from an average -0.7 percent in 2019 to 7.3 percent in 2020, driven by rising food prices.
  - Rise in food prices disproportionately impacts the poor and threatens food security; higher inflation worsens living standards and social outcomes.
- Financing gaps and external pressures:
  - Fiscal financing gap for 2021/22 is estimated at 3.2 percent of GDP.
  - Balance of payments needs for 2021/22 are estimated at 4.4 percent of GDP.
  - Current account deficit expected to remain sizeable in FY2021/22 reflecting subdued exports, rising fuel prices and import bills, and rising import needs (vaccines, therapeutics, personal protective equipment, and other COVID-related goods).
  - General SDR allocation provided some policy space, but the external financing gap remains large and could lead to economic disruption if not addressed.
- Support received to date:
  - Received support in 2020/21 from the IMF’s CCRT and to a lesser extent the World Bank; and from the Exim Bank of China and the Kuwait Fund under the G20’s DSSI debt service relief.

### Pandemic response measures taken by authorities
- Public-health and containment measures:
  - Developed a robust national COVID-19 response plan and established a national multi-sectoral COVID-19 steering committee for coordination and implementation.
  - Closed all ports of entry, the Bujumbura airport and land border crossings from March to November 2020 and March to January 11, 2021 respectively.
  - Organized mass screening campaigns and adopted barrier measures against COVID-19.
  - Started vaccinations using the 500,000 doses of Sinopharm received.
  - Applied to the Global Alliance for Vaccination and Immunization (GAVI) to access the COVID-19 Vaccine Access Facility (COVAX).
- Health system and social protection strengthening:
  - Allocated US$150 million (4.7 percent of GDP) as part of their COVID-19 response plan.
  - Of this amount, US$58 million is apportioned to the Contingency Plan for implementation of sanitary measures.
  - Actions included: implementing hygiene measures, increasing water supply, activating a reception center for public health emergencies and the COVID-19 coordination mechanism, hiring additional doctors and nurses, equipping specialized laboratories with COVID-19 diagnostic equipment, test kits and reagents, and protecting and training health personnel on COVID-19 protocols.
- Fiscal policy for FY2021/22:
  - Calibrated to accommodate increased spending to limit spread of the virus and mitigate economic and social impact while preserving debt sustainability.
  - Increased spending on women, youth, people with disabilities, and victims of natural disasters.
  - Plan to spend an additional 2.2 percent of GDP under the recently adopted vaccination strategy.
- Monetary and financial sector measures:
  - Banque de la Republique de Burundi (BRB) maintained an accommodative monetary policy stance to support the recovery.
  - BRB ensured adequate liquidity in the banking sector and created a new refinancing window for banks extending long-term loans to high-growth priority sectors.
  - Allowed greater flexibility in loan restructuring procedures and time-bound extensions of loan maturities to affected borrowers, especially in the trade sector.

### Medium-term policy measures and structural agenda
- Fiscal consolidation:
  - Plan to implement growth-friendly fiscal consolidation beyond 2021/22 to bring public debt onto a downward trajectory through revenue mobilization and expenditure management measures.
- Monetary and exchange rate policy:
  - BRB will continue to monitor inflation risks to inform the duration of its accommodative stance.
  - Authorities are working with Fund staff to develop a roadmap for an orderly transition to a more flexible exchange rate regime and to reduce the parallel market premium.
  - BRB stands ready to recalibrate liquidity provisions and policy stance as needed, will monitor the financial sector for emerging vulnerabilities, and will gradually tighten implementation of forbearance policies to contain potential risks.
- Structural priorities (in line with the 2018–27 Development Plan (PND)):
  - Enhance export diversification.
  - Facilitate infrastructure development.
  - Improve access to social safety nets and public services.
  - Improve governance to enhance inclusive and durable growth.

### Conclusion and re-engagement intentions
- Authorities remain committed to implementing policies to ensure macroeconomic stability and support a durable recovery.
- Confident that Fund support will help catalyze additional donor support to alleviate strains on the economy and address financing needs.
- Look forward to Executive Directors’ support and approval of the RCF as a critical step in re-engagement efforts.
- Have resumed data provision to the Fund and committed to Article IV consultations and Safeguards Assessment missions in the foreseeable future.
- Plan to strengthen coordination between various agencies for more effective management of economic policies and look forward to further Fund engagement and technical support.

*Source: Authorities’ statement contained in the IMF staff report content unit 1bdiea2021001*

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_Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1bdiea2021001.pdf_