## 1. Recent Developments, 2019–25 ## Source details **Canonical URL:** [1. Recent Developments, 2019–25](https://www.imf.org/-/media/files/publications/cr/2026/english/1bdiea2026001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2026/english/1bdiea2026001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2026/english/1bdiea2026001.pdf.json) --- ### Background and context - Burundi is a post-conflict country with substantial fragilities: weak institutions, recurring political tensions, legacy of the 2015 crisis, and conflict in neighboring DRC. - Two-thirds of the population below the age of 25; one of the lowest per capita incomes globally. - Political timeline: Parliamentary and local elections in August 2025 resulted in a victory of the ruling party. Presidential elections are scheduled for 2027. - Policy framework: The new government adopted a “Macroeconomic Stabilization Plan” in January 2026 to restore macroeconomic stability through fiscal consolidation, tighter monetary policy, FX reforms, structural reforms in agriculture and mining, and business climate improvements. - IMF traction: Fiscal tightening and discontinuation of monetary financing recommended in the 2025 Article IV are being implemented; FX reforms remain pending. ### Recent macroeconomic developments (2019–25 and early 2026) - Growth and commodity shock: - Growth: 4.2 percent in 2025, supported by a large positive terms-of-trade shock from surging coffee and gold prices (coffee and gold exports doubled and tripled, respectively). - Export-related FX inflows peaked in H2 2025, relieving import constraints. - Inflation and monetary conditions: - Inflation peaked at 45 percent (y/y) in April 2025. - Inflation fell to 8.6 percent in April 2026 (the lowest monthly rate since June 2021), but is expected to rise again later in 2026. - BRB real policy rate moved from -23 percent on average in 2025 to slightly positive by early‑2026. - Monetary financing freeze since mid‑2025 slowed money growth and supported disinflation. - External imbalances and reserves: - 2025 current account deficit: 6.6 percent of GDP. - Parallel market premium: peaked at 160 percent in 2024; declined to 95 percent in 2025; staff references around 100 percent at end‑2025 in some assessments. - Estimated REER overvaluation: 72 percent of the official exchange rate (EBA-lite/REER estimates presented elsewhere: 71.8 percent and 49 percent). - FX reserves: USD214 million at end-2025, or 1.6 months of imports. - Credit, banking and liquidity: - Private sector credit fell from about 41 percent of GDP in 2023-24 to 35 percent in 2025. - Excess reserves declined in 2026 due to shift to market financing and BRB FX sales; a significant share of excess reserves are USD deposits from BRB gold purchases that are not readily usable. - Treasury’s shift to market-based deficit financing may compete with private credit; government securities now account for about a quarter of bank assets. - Fiscal outcomes and debt: - FY2024/25 primary deficit: 4.2 percent of GDP (5.5 percent overall). - FY2025/26 staff forecast: primary deficit of 2.1 percent of GDP (3.4 percent overall); budget targeted fiscal consolidation of 4.4 ppts of GDP. - Public debt: declined from 53 percent at end-2024 to 42 percent of GDP at end-2025, driven by strong nominal GDP growth. - Domestic debt: three quarters of total; 45 percent of domestic debt is low-interest central bank loans. - External debt: 11 percent of GDP, mainly multilateral creditors. - External debt arrears as of March 2026: USD 33 million (0.5 percent of GDP). - Debt assessed as sustainable under the baseline with high risk of external debt distress and high overall risk of debt distress. - Poverty and labor: - 74 percent of the population living on less than 3 USD per day (2021 PPP). - 85 percent of the workforce employed in subsistence agriculture. ### Outlook and risks (staff baseline and scenarios) - Baseline projections: - Growth: 3.9 percent for 2026; 4.3 percent per year over 2027-31. - CPI inflation: average 14.5 percent in 2026, declining gradually to 11.5 percent by 2031. - Official aid flows: about 3 percent of GDP. - FX reserves: projected to increase to cover 2.8 months of imports by 2031. - Public debt: projected to decline to 32 percent by 2031 under government announced objectives (staff project 32.4 percent in 2031 under their preferred path). - Downside risks: - Domestic: weaker fiscal performance, implementation challenges, potential slippages ahead of 2027 election. - External: sensitivity to terms-of-trade deterioration that would reduce FX inflows and trigger exchange rate pressures. - Downside scenario (Annex IX): medium-term growth slows to 3.3 percent and inflation rises to 20.8 percent (scenario tables provide detailed trajectory: e.g., growth 3.3 in 2026; inflation 17.6 in 2026 and 27.7 in 2027). - Reserve coverage in downside: falls to 1.2 months in 2026 and 0.8 by 2031 (vs. baseline 2.0 in 2026 and 2.8 in 2031). - Authorities’ view: - Project average growth of 7.7 percent over the forecast horizon and expansion of power grid access up to 70 percent of the population by 2028. ### Policy discussions and priorities - Macroeconomic stabilization prerequisites: - Sustained fiscal prudence, tighter monetary policy, FX unification and flexible exchange rate regime. - Governance reforms and measures to promote productive sectors (agriculture, mining, electrification). - Near-term contingency: - If Middle East war reverses terms-of-trade gains, staff would recommend reallocating fiscal resources to well-targeted social assistance while continuing macroeconomic reforms. - Staff assessment: stabilization is “within reach” if authorities sustain policy and governance efforts. ### Staying the course on fiscal policy — staff analysis and recommendations - Authorities’ MTBF objective: - Reduce public debt to 26.2 percent of GDP by 2029 from 42 percent at end-2025 — requires a primary balance between -0.2 and -0.6 percent of GDP and fiscal consolidation ~0.4 ppt of GDP over three fiscal years. - Staff recommended medium-term path (less aggressive): - Staff project public debt reaching 32.4 percent in 2031 under authorities’ announced policies; staff advocate targeting public debt of 29.5 percent of GDP by end-2031. - Necessary fiscal stance: reduce the primary deficit to an average of about 1.5 percent of GDP over 2027-2031 (staff baseline projects 2.1 percent of GDP), entailing fiscal consolidation of 0.9 ppts of GDP over 5 fiscal years. - Fiscal composition and revenue mobilization: - Current tax revenue: 12 percent of GDP. - Tax exemptions: BIF 225.19 billion (1.5 percent of GDP) in FY2024/25 (mainly VAT on imports). - Potential yields: - Tax administration measures: 0.5-0.8 of GDP over 5 years. - Tax policy measures: up to 1.2 ppt in first 3-5 years and up to 1.5 ppt by year 7. - Combined potential revenue increase: up to 2-2.5 ppts of GDP over a 5-7 year horizon. - Draft FY2026/27 budget projects overall fiscal deficit of 2 percent of GDP (below staff’s 3.4 percent projection). - Staff principal fiscal scenario elements: - Raise tax revenue by an additional 2.1 ppts to reach 15.6 percent of GDP by FY2030/31 through: - Partial phasing‑out of VAT exemptions (0.8 ppts). - Improved tax compliance risk management systems (0.5 ppts). - Improved customs compliance enforcement (0.35 ppts). - Reducing CIT exemptions (0.4 ppts). - Non‑interest current expenditure: maintain wage bill stable as a share of GDP while increasing targeted priority spending by 0.5 ppts financed by phasing out untargeted subsidies and eliminating waste. - Capital expenditure: staff recommend adjustments vs baseline (baseline increase by 2.5 ppts noted) to balance development needs and fiscal sustainability. ### Fiscal baseline vs active fiscal scenario; public investment - Proposal: raising capital expenditure by 3.3 ppts would bring capital expenditure to 11.7 percent of GDP, close to the authorities’ objective of it representing 50 percent of total expenditure. - Staff project domestic financing of about 2.9 percent of GDP per year over the medium term. - External financing expected to remain limited to concessional sources. - Recommendation: develop domestic debt market by extending maturities and broadening investor base to manage rollover risks and contain borrowing costs. ### Financing outlook and risks - Suspension of BRB advances and shift to market-based financing is an important milestone; financing outlook still warrants caution. - Under baseline, monetary financing is assumed at 10 percent of the previous year’s tax revenue. - Potential effects: borrowing costs could increase and some crowding out of private sector lending could occur; higher real rates could boost deposits. - Recommendation: careful monitoring of domestic bank financing reliance and prudent market-development measures. ### Public financial management (PFM), arrears and contingency design - Persisting PFM weaknesses: budget credibility, procurement transparency, audit independence, internal controls, and PFM digitalization remain weak. - Recommendations: - Improve monitoring and reporting of expenditure arrears; expedite clearance of existing arrears and timely payment of current dues. - Formalize Public Investment Management (PIM) procedures, enforce procurement rules, and enhance procurement transparency. - Contingency measures: prefer deficit-neutral, well-targeted, transitory social assistance over regressive generalized price subsidies; finance via reallocations, efficiency gains, and reductions in non-priority discretionary expenditures. ### Revenue mobilization and tax-expenditure reforms - Tax-expenditure magnitude: - Exemptions reached BIF 225.19 billion in 2024/2025 (about 1.5 percent of GDP or 9.3 percent of revenues). - In 2024/2025, exemptions projected in the budget were BIF 109.65 billion, but government granted BIF 225.19 billion; government missed revenue target by BIF 111.51 billion. - Composition of exemptions (2024/2025): - By tax category: Value Added Tax: 66.7; Import Duties: 22.0; Excise Duties: 0.3%; Specific Fuel Taxes: 0.5%; Consumption Tax on Sugar: 0%. - By beneficiary category: External financing: 38%; Investors: 32%; Gov Entities: 24%; Others: 6%. - Recommendations: - Strengthen tax expenditure reporting and undertake systematic review of exemptions. - Short-run priorities: focus on VAT reform, reduce VAT registration thresholds, review and eliminate unnecessary VAT exemptions, reduce items taxed at reduced VAT rate. ### Monetary path and liquidity management - Staff recommendation: further tighten monetary stance to rebuild credibility and anchor inflation expectations. - Target: move the real policy rate gradually to the 3-5 percent range. - Ongoing measures: TSA implementation expected to contract liquidity by about 0.5 to 1 percent of GDP by shifting public sector idle deposits to the BRB. - Recommendation: BRB should start using open-market operations or increase reserve requirements from the current 5 percent to manage liquidity proactively; strengthen operational framework and support interbank market operations. ### Foreign exchange (FX) framework reform - Recommendation: phase out the dual exchange rate system and transition toward a more flexible exchange rate regime to reduce distortions, support competitiveness and strengthen FX inflows. - Options: rapid unification with a one‑off official rate adjustment (about 97 percent devaluation implied in Scenario I), gradual crawling peg (Scenario II), or disinflation-led convergence with large fiscal/monetary tightening (Scenario III). - Scenario III quantitative implication example: - Bringing parallel rate from 6’100 BIF/USD to around 3’184 BIF/USD over 12 quarters implies an appreciation of around 48% and would require a sustained reduction in year‑on‑year reserve money growth of roughly 30 percentage points relative to baseline and an overall fiscal adjustment of about 10.8 percentage points of GDP, with GDP about 20% smaller than baseline after 3 years. - Post-unification regime: full-floating exchange rate or semi-managed hybrid are options; floating deemed plausible given reserves constraints. - Tactical and sequencing guidance: adopt a clearly sequenced roadmap, BRB to clarify FX operation framework (regular auctions and interventions), allow FX bureaus to set rates freely, and reverse mandated move of NGOs’ FX accounts to the BRB. ### Financial sector resilience and supervision - Banking sector broadly resilient but pockets of vulnerability; deterioration in liquidity indicators noted. - At end-2025, government debt accounted for about 28 percent of banks' total assets. - Risks: rapid credit growth in 2021-23, weak supervision, sovereign-bank nexus, concentration risks, contingent liabilities vis‑à‑vis SOEs, limited progress measuring/managing FX risk. - Recommendations: - Close supervision during liquidity normalization; assess banks’ liquidity ratios. - Provide access to standing liquidity facilities against high‑quality collateral for solvent but temporarily illiquid institutions. - Conduct an Asset Quality Review (AQR); allocate resources for AQR and enhance reporting on NPLs, restructured loans, and sectoral concentrations. - Reinforce limits on banks’ net open FX positions with granular, frequent reporting. ### AML/CFT, bank-resolution framework and safeguards - FATF evaluation mission took place in February–March 2026; provisional report produced. - An AML unit established at the BRB; authorities engaged in implementing measures to avoid grey-listing though an observation period will follow. - Burundi’s AML/CFT framework remains extremely weak across all major areas of evaluation. - Bank-resolution legal and operational framework remains incomplete. - Recommendation: prioritize AML/CFT remediation and complete the bank-resolution framework. - Safeguard recommendations: implement 2022 safeguard actions to strengthen central bank independence and transparency; resume external audits and publication of BRB audited financial statements (none published since FY2021). ### Governance, SOEs and central bank transparency - About 40 percent of SOEs submitted financial statement and debt reports to the MoF. - SOEs remain a major source of fiscal liability amid operational inefficiencies and lack of transparency; their large presence in agriculture, electricity, and fuel crowds out private sector participation. - Immediate actions recommended: - Establish operational framework for gold transactions. - Develop exit plan for BRB quasi‑fiscal activities. - Ensure reserve assets placed exclusively with investment‑grade counterparties. - Resume external audits and regular publication of audited BRB financial statements. - Authorities’ measure: all SOE borrowing and dividend decisions now require MoF validation. ### Strategic sectors for medium-term growth: coffee, artisanal gold, electricity - Coffee: - Low yields due to underinvestment and aging plantations; recommendations: increase pass-through from international prices to small farmers, target fertilizer subsidies, incentives for better cultivating techniques, manage ODECA on a fully commercial arm’s‑length basis. - Artisanal gold (ASGM): - Gold accounted for 41 percent of total merchandise goods in 2025. - Gold prices doubled since 2023, reaching $4,500 per troy ounce at end-2025; BRB exported 1.2 metric tons in 2025 vs. 0.4 tons in 2024. - Challenges: informality, limited mechanization, infrastructure gaps, institutional weaknesses, leakage between official exports and mirror imports. - Recommendations: progress towards EITI membership, formalize gold sector, consider invoicing BRB gold purchases in domestic currency in the context of FX unification, accelerate semi‑mechanization. - Electricity: - Electricity production increased sixfold since 2020, but access remains a bottleneck. - Expanding transmission and distribution to give grid access to 70 percent would generate close to 2 percent additional growth beyond baseline. - Recommendation: focus on distribution and transmission; accelerate transmission and distribution PPP project; reform the role of REGIDESO. - Electrification projection excerpts (Percent): 2026: 3.9%, 2027: 4.2%, 2028: 4.5%, 2029: 4.3%, 2030: 4.3%, 2031: 4.2% (additional projection series provided in the source). ### External sector assessment and reserves guidance - Overall assessment: external position assessed as substantially weaker than implied by fundamentals and desirable policies. - NIIP/GDP estimated at -60% of GDP in 2025 (from -77% in 2024 and -83% in 2023). - Total foreign assets estimated at USD 1,110 million in 2025; total liabilities USD 5,233 million in 2025. - Reserve adequacy guidance: - Optimal reserve coverage range between 3.5 and 4.6 months of imports given shock-prone environment; minimum reserve level recommended at 3.5 months of imports. - Gold exports and external flows: - Gold exports materially improved external conditions in 2024 and 2025; scenarios highlight sensitivity to gold volumes and prices. ### FX unification scenarios (Annex VIII) — summary of trade-offs - Scenario I (“One‑Off”): one‑off devaluation ~97 percent to reset official rate to equilibrium; rapid realignment but concentrated transition risks (balance‑sheet exposure, social costs). - Scenario II (Gradual/Crawling Peg): announced gradual depreciation to close REER gap by early 2028; smoother but risks prolonged distortions and slower reserve accumulation. - Scenario III (Disinflation‑led convergence): keep official rate fixed while deploying very large fiscal/monetary tightening; implies severe macroeconomic costs (GDP ~20% smaller after 3 years) and implausibly large adjustments. - Cross‑scenario guidance: require coherent package (clear exchange rate strategy, supporting fiscal/monetary policies, measures to strengthen FX supply and confidence, calibrated sequencing). ### Data, technical assistance and statistical gaps - Data shortcomings: gaps in Government Financial Statistics coverage (including SOE debt), National Accounts granularity and timeliness, external sector frequency and IIP dissemination. - National accounts compiled on SNA 1993 with base year 2005; rebasing and migration to SNA 2008 expected with first rebased data by end‑2025. - BoP reporting lag: about 3 months; IIP only annual and not disseminated. - Ongoing TA: Burundi is the largest receiver of IMF technical assistance within SSA fragile states; TA programs support PFM, fiscal risk management, macro‑fiscal policies, bank supervision, and statistics (selected TA delivery dates preserved in source: May-26, Apr-26, 2026 Mar-26, May-25, Nov-25, Oct-25, May-25). - Data improvement priorities: improve fiscal granularity (including arrears), external sector data (financial account), monetary and financial statistics, and banking supervision reporting (NPLs, FX exposures). ### Implementation of past IMF recommendations (Annex I) — summary - Fiscal & debt: partially implemented fiscal tightening and PFM reforms; minimal recourse to BRB financing in FY25/26; no progress on reducing tax exemptions. - FX & monetary: FX unification not implemented; monetary tightening driven by fiscal compression and monetary financing interruption; no official rate hikes or quantitative tightening by BRB in 2025–early 2026. - Governance: partial implementation; anti‑corruption framework launched at the Revenue Authority; safeguards recommendations not yet implemented. - Structural & financial: partial steps on coffee and mining formalization; USD1.5 bln PPP in transmission and distribution under discussion; AQR and some FSSR recommendations pending. ### Debt sustainability and risk assessment - Staff assesses debt as sustainable under the baseline, with: - External debt distress: high risk. - Overall risk of debt distress: high. - Baseline external indicators: - PV of baseline external debt-to-exports: 99 percent in 2025; 90 percent in 2026; 79 percent in 2027. - PV of total public debt-to-GDP: 39 percent in 2025; 37 percent in 2026–27; projected to fall below 35 percent from 2029. - Downside stress: PV of external debt-to-exports breaches 140 percent in 2026–28 and peaks at 180 percent under a customized downside scenario. - Key debt stock figures (end period, US$ Million): - Total: 2818.1; External: 727.6; Domestic: 2090.6; T-Bills: 325.8; Bonds: 691.5; Loans: 1073.3. - Nominal GDP: 6767.11. ### Institutional and programmatic notes - Strengthening BRB operational frameworks, PFM, debt management, and anti‑corruption institutions are cross‑cutting enablers. - Capacity development spending concentrated in fiscal and monetary workstreams; proposal to resume Article IV on a 12‑month cycle. *Source: 1bdiea2026001 - https://www.imf.org/-/media/files/publications/cr/2026/english/1bdiea2026001.pdf* ### 1. Recent Developments, 2019–25 _______________________________________________________________ 30 ### 1. Recent Developments, 2019–25 ### Background and context - Burundi is a post-conflict country with substantial fragilities: weak institutions, recurring political tensions, legacy of the 2015 crisis, and conflict in neighboring DRC. - Low income and demographics: one of the lowest per capita incomes globally; two-thirds of the population below the age of 25. - Political timeline: Parliamentary and local elections in August 2025 resulted in a victory of the ruling party. Presidential elections are scheduled for 2027. - Policy framework: The new government adopted a “Macroeconomic Stabilization Plan” in January 2026 (Annex IV) to restore macroeconomic stability through fiscal consolidation, tighter monetary policy, FX reforms, structural reforms in agriculture and mining, and business climate improvements. - IMF traction: Fiscal tightening and discontinuation of monetary financing recommended in the 2025 Article IV are being implemented; FX reforms remain pending. ### Recent macroeconomic developments (2019–25 and early 2026) - Growth and commodity shock: - Growth: 4.2 percent in 2025, supported by a large positive terms-of-trade shock from surging coffee and gold prices (coffee and gold exports doubled and tripled, respectively). - Export-related FX inflows peaked in H2 2025, relieving import constraints. - Inflation: - Inflation peaked at 45 percent (y/y) in April 2025. - Inflation fell to 8.6 percent in April 2026 (the lowest monthly rate since June 2021), but is expected to rise again later in 2026. - Early-2026 disinflation drivers: reduced fiscal impulse, freeze in BRB advances to the government since mid‑2025, falling food and imported prices, and parallel exchange rate appreciation. - Poverty and labor: 74 percent of the population living on less than 3 USD per day (2021 PPP); 85 percent of the workforce employed in subsistence agriculture. - External imbalances and reserves: - 2025 current account deficit: 6.6 percent of GDP. - Parallel market premium: peaked at 160 percent in 2024; declined to 95 percent in 2025. - Estimated REER overvaluation: 72 percent of the official exchange rate. - FX reserves: USD214 million at end-2025, or 1.6 months of imports. - Monetary conditions and liquidity: - Monetary financing freeze slowed money growth and supported disinflation. - BRB real policy rate is now slightly positive (compared to -23 percent on average in 2025). - Excess reserves declined in 2026 due to shift to market financing and BRB FX sales; a significant share of excess reserves are USD deposits from BRB gold purchases that are not readily usable. - Credit and banking: - Private sector credit fell from about 41 percent of GDP in 2023-24 to 35 percent in 2025. - Return to positive real lending rates expected to support credit over time. - Treasury’s shift to market-based deficit financing may compete with private credit. - Fiscal developments: - FY2024/25 primary deficit: 4.2 percent of GDP (5.5 percent overall). - FY2025/26 staff forecast: primary deficit of 2.1 percent of GDP (3.4 percent overall); budget targeted fiscal consolidation of 4.4 ppts of GDP. - Staff project lower grants and other revenues (by 3.5 and 2.4 percent of GDP, respectively), partly offset by higher tax revenue (by 0.9 percent of GDP). - Staff assume no change in the stock of expenditure arrears. - Debt: - Public debt declined from 53 percent at end-2024 to 42 percent of GDP at end-2025, driven by strong nominal GDP growth. - Domestic debt: three quarters of total; 45 percent of domestic debt is low-interest central bank loans. - External debt: 11 percent of GDP, mainly multilateral creditors. - External debt arrears as of March 2026: USD 33 million (0.5 percent of GDP). - Debt is assessed as sustainable with a high risk of external debt distress and high overall risk of debt distress. ### Outlook and risks - Baseline projections: - Growth: 3.9 percent for 2026; 4.3 percent per year over 2027-31. - CPI inflation: average 14.5 percent in 2026, declining gradually to 11.5 percent by 2031. - Official aid flows: about 3 percent of GDP. - FX reserves: projected to increase to cover 2.8 months of imports by 2031. - Public debt: projected to decline to 32 percent by 2031 under government announced objectives. - Downside risks: - Domestic: weaker fiscal performance, implementation challenges, potential slippages ahead of 2027 election. - External: sensitivity to terms-of-trade deterioration that would reduce FX inflows, trigger exchange rate pressures, derail reforms. - Downside scenario (Annex IX): medium-term growth slows to 3.3 percent and inflation rises to 20.8 percent. - Risk of relapse into monetary financing and widening foreign exchange premium if shocks materialize. - Authorities’ view: project average growth of 7.7 percent over the forecast horizon, with committed reforms and expansion of power grid access up to 70 percent of the population by 2028. ### Policy discussions and priorities - Macroeconomic stabilization prerequisites: - Sustained fiscal prudence, tighter monetary policy, FX unification and flexible exchange rate regime. - Governance reforms and measures to promote productive sectors (agriculture, mining, electrification). - If policies falter, domestic and external imbalances will hinder poverty reduction and leave the economy vulnerable. - Near-term contingency: if the Middle East war reverses terms-of-trade gains, staff would recommend reallocating fiscal resources to well-targeted social assistance while continuing macroeconomic reforms. ### Staying the course on fiscal policy (staff analysis and recommendations) - Authorities’ MTBF aims to reduce public debt to 26.2 percent of GDP by 2029 from 42 percent at end-2025, requiring a primary balance between -0.2 and -0.6 percent of GDP and fiscal consolidation on the order of 0.4 ppt of GDP over three fiscal years. - Staff recommendation for a less aggressive debt path: - Staff project public debt reaching 32.4 percent in 2031 under authorities’ announced policies. - Staff advocate a medium-term fiscal path targeting public debt of 29.5 percent of GDP by end-2031. - This target is consistent with keeping the present value of public debt below the 35 percent of GDP LIC-DSF threshold and provides a buffer given the high risk of debt distress. - Required fiscal stance: reduce the primary deficit to an average of about 1.5 percent of GDP over 2027-2031 (staff baseline projects 2.1 percent of GDP over the same period), entailing fiscal consolidation of 0.9 ppts of GDP over 5 fiscal years. - Revenue mobilization and fiscal composition: - Current tax revenue: 12 percent of GDP. - Tax exemptions: BIF 225.19 billion (1.5 percent of GDP) in FY2024/25 (mainly VAT on imports). - Potential yields: - Tax administration measures: 0.5-0.8 of GDP over 5 years. - Tax policy measures: up to 1.2 ppt in first 3-5 years and up to 1.5 ppt by year 7 (Annex V). - Combined potential revenue increase: up to 2-2.5 ppts of GDP over a 5-7 year horizon. - Draft FY2026/27 budget projects overall fiscal deficit of 2 percent of GDP (below staff’s 3.4 percent projection), reflecting higher tax revenue projections from VAT invoicing machines and e-KORI rollout. - Staff’s recommended fiscal scenario (principal elements): - Tax revenue: under current policies tax revenue set to increase by 1.6 ppts by FY2030/31 via VAT invoicing machines and digital revenue system. Staff recommend raising tax revenue by an additional 2.1 ppts to reach 15.6 percent of GDP by FY2030/31 through: - Partial phasing-out of VAT exemptions (0.8 ppts). - Improved tax compliance risk management systems (0.5 ppts). - Improved customs compliance enforcement (0.35 ppts). - Reducing CIT exemptions (0.4 ppts). - Non-interest current expenditure: maintain wage bill stable as a share of GDP while increasing targeted priority spending (means-tested food, education, healthcare) by 0.5 ppts financed by phasing out untargeted subsidies and eliminating waste. - Capital expenditure: staff recommend adjustments compared to baseline (baseline increase by 2.5 ppts noted) to balance development needs and fiscal sustainability. *Source: 1bdiea2026001 - 1. Recent Developments, 2019–25* ### 3.3 ppts, to address pressing needs for infrastructure maintenance (water, power and transport). This ### 1bdiea2026001 - 3.3 ppts, to address pressing needs for infrastructure maintenance (water, power and transport). This ### Fiscal baseline vs. active fiscal scenario; public investment - Raising capital expenditure by 3.3 ppts would bring capital expenditure to 11.7 percent of GDP, close to the authorities’ objective of it representing 50 percent of total expenditure. - Stronger public investment management, informed by the recent PIMA, is expected to improve investment efficiency and growth impact. - Staff project domestic financing of about 2.9 percent of GDP per year over the medium term. - External financing is expected to remain limited to concessional sources. - Recommendation: Develop the domestic debt market by extending maturities and broadening the investor base to manage rollover risks and contain borrowing costs. ### Financing outlook and risks - The suspension of BRB advances and shift to market-based financing is an important milestone; however, the financing outlook still warrants caution. - Under the baseline, monetary financing is assumed at 10 percent of the previous year’s tax revenue. - Government securities now account for about a quarter of bank assets. - Potential effects: borrowing costs could increase and some crowding out of private sector lending could occur (though higher real rates could boost deposits). - Recommendation: Careful monitoring of domestic bank financing reliance and prudent market-development measures. ### Public financial management (PFM), arrears and contingency design - Persisting PFM weaknesses: budget credibility, procurement transparency, audit independence, internal controls, and PFM digitalization remain weak. - Inadequate project appraisal, selection, execution, maintenance, climate integration, and consolidation of public investment constrain efficiency and infrastructure quality. - Recommendations and priorities: - Improve monitoring and reporting of expenditure arrears; expedite clearance of existing arrears and timely payment of current dues. - Formalize PIM procedures, enforce public procurement rules, and enhance procurement transparency. - Contingency measures: prefer deficit-neutral, well-targeted, and transitory social assistance over regressive generalized price subsidies; finance supportive measures via reallocations, efficiency gains, and reductions in non-priority discretionary expenditures. ### Revenue mobilization and tax expenditure reforms - Burundi’s tax revenue potential is put ahead of its FCS peers (Text Figure evidence). - Authorities acknowledge the need to rationalize exemptions and are assessing the current exemption regime. - Ongoing initiatives: broaden the tax base, improve compliance, roll out electronic billing, operationalize EKori, and prepare a Medium-Term Revenue Strategy. - Recommendation: Accelerate tax administration and policy reforms while balancing revenue mobilization with targeted investment incentives. ### Monetary path and liquidity management - Staff recommendation: further tighten the monetary stance to rebuild credibility and anchor inflation expectations. - Target: move the real policy rate gradually to the 3-5 percent range. - Ongoing measures: TSA implementation is expected to contract liquidity by about 0.5 to 1 percent of GDP by shifting public sector idle deposits to the BRB. - Recommendation: BRB should start using open-market operations or increase reserve requirements from the current 5 percent to manage liquidity more proactively. - Strengthen operational framework and support interbank market operations to align interbank rates with policy rates and improve transmission. ### Foreign exchange (FX) framework reform - Phasing out the dual exchange rate system and transitioning towards a more flexible exchange rate regime would reduce distortions, support competitiveness and strengthen FX inflows. - Benefits: boost exports and FDI, raise the value of external aid, and reduce informality and smuggling. - Options: rapid unification and move towards floating, or gradual convergence; staff note risks of extended transition fueling speculation. - Recommendation: adopt a clearly sequenced roadmap for FX unification; BRB to clarify FX operation framework, include regular auctions and intervention modalities; facilitate FX bureaus by allowing FX rates to be set freely and reverse the mandated move of NGOs’ FX accounts to the BRB. - Post-unification: adopt either a full-floating exchange rate or a semi-managed exchange rate regime. ### Financial sector resilience and supervision - Banking sector broadly resilient but pockets of vulnerability exist; deterioration in liquidity indicators noted. - At end-2025, government debt accounted for about 28 percent of banks' total assets. - Risks: rapid credit growth in 2021-23, weak supervision, sovereign-bank nexus, concentration risks, contingent liabilities vis‑à‑vis SOEs, limited progress measuring/managing FX risk. - Recommendations: - Close supervision during liquidity normalization; assess impact on banks’ liquidity ratios and identify banks at risk of falling below regulatory minimums. - Provide access to standing liquidity facilities against high‑quality collateral for solvent but temporarily illiquid institutions. - Conduct an Asset Quality Review (AQR); allocate resources for AQR and enhance reporting on NPLs, restructured loans, and sectoral concentrations. - Intensify supervision of banks with rapid credit growth, significant FX exposures, or large sovereign holdings. - Reinforce limits on banks’ net open FX positions, backed by granular and frequent reporting. ### AML/CFT, bank-resolution framework and safeguards - FATF evaluation mission took place in February–March 2026; provisional report produced. - An AML unit has been established at the BRB; authorities engaged in implementing measures to avoid grey-listing though an observation period will follow. - Burundi’s AML/CFT framework remains extremely weak across all major areas of evaluation. - Bank-resolution legal and operational framework remains incomplete. - Recommendation: prioritize AML/CFT remediation and complete the bank-resolution framework. ### Governance, SOEs and central bank transparency - Strengthening governance is critical to unlocking growth; IMF Governance Diagnostic Assessment (GDA) is being finalized. - About 40 percent of SOEs submitted financial statement and debt reports to the MoF. - SOEs remain a major source of fiscal liability amid operational inefficiencies and lack of transparency; their large presence in agriculture, electricity, and fuel crowds out private sector participation. - Safeguard recommendations: implement 2022 safeguard actions to strengthen central bank independence and transparency. - Immediate actions needed: establish operational framework for gold transactions, develop exit plan for BRB quasi-fiscal activities, ensure reserve assets placed exclusively with investment-grade counterparties, resume external audits and regular publication of audited BRB financial statements (none published since FY2021). - Authorities’ measure: all SOE borrowing and dividend decisions now require MoF validation. ### Strategic sectors for medium-term growth: coffee, artisanal gold, electricity - Priority sectors: coffee, artisanal gold mining and electricity. - Coffee: low yields due to underinvestment, aging plantations and limited price incentives; recommendations: increase pass-through from international prices to small farmers, target fertilizer subsidies, incentives for better cultivating techniques, and manage ODECA on a fully commercial and arm’s-length basis. - Mining: informality, limited mechanization, infrastructure gaps and institutional weaknesses constrain investment; recommendations: progress towards EITI membership, gold sector formalization, invoicing BRB gold purchases in domestic currency to contribute to reserve accumulation and discourage illegal exports, full mechanization to raise yields. - Electricity: - Electricity production has increased sixfold since 2020, but poor access remains a bottleneck. - Expanding transmission and distribution to give grid access to 70 percent would generate close to 2 percent additional growth beyond baseline projections. - Recommendation: focus on distribution and transmission; accelerate implementation of transmission and distribution PPP project; reform the role of REGIDESO. - Electrification and growth figures (selected exact values from projections): - Electrification rate (Percent): 2026: 3.9%, 2027: 4.2%, 2028: 4.5%, 2029: 4.3%, 2030: 4.3%, 2031: 4.2% (additional series: 4.3%, 4.7%, 5.3%, 5.3%, 5.4%, 5.8% appear in projection context). - Captioned production series and projection counts appear in Text Figure 8 (based on REGIDESO data); note that production projections do not reflect plans for solar capacity nor nuclear. ### Data, technical assistance and statistical gaps - Data shortcomings hamper surveillance: gaps in Government Financial Statistics coverage (including SOEs debt) and National Accounts (granularity, frequency, timeliness). - Burundi is the largest receiver of IMF technical assistance within SSA fragile states. - Ongoing IMF technical assistance is supporting progress in PFM, fiscal risk management and macro-fiscal policies to strengthen forecasting and policy evaluation capacity. *Source: 1bdiea2026001 - https://www.imf.org/-/media/files/publications/cr/2026/english/1bdiea2026001.pdf* ### 44. Authorities stressed their focus on export sector development. They welcomed staff ### 44. Authorities stressed their focus on export sector development. They welcomed staff recommendations to increase agricultural yields and highlighted the recent efforts to diversify export products, plant new coffee trees and improve agricultural techniques. Authorities emphasized priority on the formalizing and mechanizing of artisanal mining, expanding energy and transport infrastructure, strengthening digitalization and welcomed ongoing plans to reinforce IMF technical assistance in fiscal, monetary and statistical reform areas. ### Authorities' actions and priority areas - Focus on export sector development, including: - Increasing agricultural yields. - Diversifying export products. - Planting new coffee trees. - Improving agricultural techniques. - Priorities for the mining sector: - Formalizing and mechanizing artisanal mining. - Infrastructure and digitalization: - Expanding energy and transport infrastructure. - Strengthening digitalization. - Institutional support: - Welcomed ongoing plans to reinforce IMF technical assistance in fiscal, monetary and statistical reform areas. ### Staff appraisal — recent economic conditions (2025) - Strong terms-of-trade gains from surging coffee and gold prices boosted exports, growth and FX inflows. - Foreign reserves increased, alleviating import constraints. - External position assessment: - "Substantially weaker than the level implied by fundamentals and desirable policies" with a sizable current account deficit and significant foreign exchange overvaluation. - Exchange rate regime: - The dual exchange rate system continues to weigh on the economy, encouraging informality and trade leakages, and discouraging investment. - Inflation: - Fell sharply from its 2025 peak, supported by fiscal adjustment and minimal monetary financing from the central bank, but stayed above its target. ### Outlook and projections - Growth: - Projected to reach 3.9 percent in 2026. - Projected to average 4.3 percent thereafter. - Support factors: favorable terms of trade and structural reforms that increase access to electricity and improve business conditions. - Inflation: - Expected to decline gradually, should better macroeconomic policies be maintained. - External balances: - Current account expected to improve and FX reserves to increase gradually. - Fiscal policy and public debt: - Fiscal policy is projected to remain tight, contributing to a continued decline in public debt. - Risks (tilted to the downside): - Fiscal slippages ahead of elections. - Adverse external shocks and supply disruptions. - A prolonged war in the Middle East could reverse recent terms of trade gains and undermine the ongoing reform momentum. ### Policy priorities and recommendations - Macroeconomic stabilization conditionalities: - Sustain commitment to fiscal prudence. - Tighten monetary policy. - Move towards FX unification and transition to a more flexible exchange rate regime. - Complementary measures: - Governance reforms and structural policy measures to boost exporting sectors. - Governance reforms in tax policy, the mining sector and FX allocation to secure sustained macroeconomic stabilization. - Assessment: - Macroeconomic stabilization is "within reach" if the authorities sustain the specified policy and governance efforts. *Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1bdiea2026001.pdf* ### 48. While the authorities’ medium-term fiscal framework aims for a sharp reduction in ### While the authorities’ medium-term fiscal framework aims for a sharp reduction in public debt ### Fiscal framework and recommendations - Staff recommend a more gradual fiscal consolidation to preserve priority social and development spending. - Stronger revenue mobilization is identified as key, through: - VAT reforms, - improved compliance, - reduced exemptions, - higher customs and corporate taxes. - Expenditure reforms should prioritize reallocating resources toward priority social sectors and boosting capital investment, especially in infrastructure. - Strengthening public financial management and debt management is recommended to mitigate fiscal risks. - Specific fiscal projection highlights (percent of GDP, fiscal year series from Table 1): - Revenue and grants: 19.9; 16.5; 17.2; 18.0; 18.1; 18.5; 18.9; 19.3 - Revenue (excluding grants): 16.0; 14.4; 14.7; 15.0; 15.1; 15.5; 15.9; 16.3 - Expenditure: 24.9; 22.0; 20.6; 21.4; 21.8; 22.1; 22.7; 23.1 - Primary balance: -3.3; -4.2; -2.1; -2.1; -2.1; -2.0; -2.2; -2.1 - Overall balance: -5.0; -5.5; -3.4; -3.4; -3.6; -3.6; -3.9; -3.8 - Public gross nominal debt: 53.3; 41.6; 38.4; 38.7; 36.6; 34.6; 34.2; 32.4 ### Monetary policy, liquidity management, and FX reform - Recommendation: tighten monetary policy and actively manage liquidity to strengthen monetary policy transmission and anchor inflation expectations. - Excess reserves weaken the link between interbank and policy rates; reduce excess reserves through open-market operations or higher reserve requirements. - A positive real policy rate is recommended to anchor inflation and support external adjustment. - Staff see a window of opportunity to advance FX reforms given improved external conditions; emphasise elaborating a well-sequenced plan. - Key related reforms: enhance the BRB FX operational framework and liberalize the FX market. - Monetary and exchange metrics (from Table 1 and monetary tables): - Real GDP growth (annual percentage change): 4.1; 4.2; 3.9; 4.2; 4.5; 4.3; 4.3; 4.2 - GDP deflator: 22.2; 37.7; 15.3; 15.6; 13.8; 12.7; 9.8; 10.3 - CPI (period average): 20.2; 34.2; 14.5; 15.3; 13.6; 13.2; 10.3; 11.5 - CPI (end of period): 36.4; 15.2; 19.6; 11.9; 15.6; 11.1; 10.7; 11.1 - Broad Money (M2) growth: 29.3; 19.4; 27.7; 20.7; 21.0; 17.2; 17.4; 15.2 - M2/GDP (percent): 43.9; 36.5; 38.9; 39.0; 39.7; 39.6; 40.5; 40.6 - Gross international reserves (US$ million): 191.3; 213.9; 296.8; 298.5; 360.8; 392.0; 478.3; 511.7 - Reserves in months of next year imports: 1.5; 1.6; 2.0; 1.9; 2.2; 2.3; 2.7; 2.8 ### Banking sector soundness and vulnerabilities - Assessment: the banking sector appears broadly resilient but vulnerabilities warrant continuous vigilance. - Key concerns: - Rapid past credit growth and limited supervisory capacity raise asset quality concerns. - High government debt positions, data gaps on FX exposures and contingent liabilities complicate risk assessment. - AML/CFT compliance issues and an incomplete bank resolution framework. - Recommended priorities: - Conduct an asset quality review. - Strengthen supervision and complete the bank resolution framework. - Selected banking indicators (from Table 6): - Nonperforming loans (percent of total gross loans): 2.5; 2.5; 2.6; 3.2; 3.6; 3.6; 4.2; 3.7; 4.0; 4.0; 3.8; 4.2 (series by quarter) - Capital requirement over risk weighted assets (solvency ratio) (quarter series): 23.6; 21.7; 20.6; 19.4; 21.3; 21.3; 20.4; 18.5; 19.9; 19.7; 18.2; 17.8 - Return on assets (quarter series): 0.4; 1.1; 1.4; 2.2; 0.6; 1.2; 1.7; 2.4; 0.6; 1.3; 1.7; 2.3 ### Governance, SOEs, and anti-corruption - Governance reforms are central to unlocking growth potential. - Progress noted in public financial management and new anti-corruption measures, but adequate resourcing of anti-corruption institutions is needed. - The Governance Diagnostic Assessment could guide a comprehensive action plan. - Reforming SOEs remains critical due to inefficiencies, fiscal risks, and limited transparency crowding out private investment. - Implementation of safeguards recommendations by the BRB would strengthen transparency and accountability. ### Sectoral growth opportunities and recommended reforms - Coffee sector: - Challenges: low yields from aging plantations, underinvestment, weak price incentives; coffee exports remain below past peaks. - Recent reforms: improved auction mechanisms and higher farmgate prices have reduced illicit trade. - Priority measures: improve passthrough from international prices in the coffee sector. - Gold mining: - Gold has displaced coffee and tea as the major exporting goods and now represents more than 40 percent of total merchandise exports. - Officially registered exported gold does not follow a constant stream of production despite high prices. - Priority measures: formalize and mechanize mining to stabilize volumes and revenues. - Electricity/power sector: - Power generation has expanded rapidly yet access remains limited and outages persist, highlighting transmission and distribution challenges. - Priority measures: scale up electricity transmission and distribution through Public-Private Partnerships in the power sector. - Other sectoral notes: - Formalization and targeted reforms in coffee production, gold mining, and electricity generation are necessary to enhance growth in key sectors. ### External sector and balance of payments outlook - Current account and trade: - Current account balance (incl. budget support, US$ million): -414.6; -448.8; -478.4; -477.8; -478.5; -494.5; -448.7; -446.9 - Trade balance (US$ million): -682.6; -685.7; -705.0; -697.0; -679.6; -679.5; -636.3; -617.5 - Exports (goods and services, percent of GDP): 7.1; 8.2; 8.4; 8.7; 10.1; 10.6; 11.9; 12.2 (from Table 1) - Imports (goods and services, percent of GDP): 26.1; 22.2; 20.6; 19.7; 20.6; 21.1; 22.0; 21.6 (from Table 1) - Gold and export dynamics: - Gold exports contributed materially to improved external conditions in 2024 and 2025. - Scenarios and notes: gold volumes and prices strongly affect export outcomes; figures and scenario descriptions illustrated in Figure 5. - Financial flows and reserves: - Financial account (US$ million): 275.1; 430.6; 322.7; 452.0; 559.9; 594.3; 656.8; 650.2 - Gross official reserves (US$ million): 191.3; 213.9; 296.8; 298.5; 360.8; 392.0; 478.3; 511.7 ### Key macroeconomic projections and indicators (select highlights from Table 1 and related tables) - Real GDP (annual percent change): 4.1; 4.2; 3.9; 4.2; 4.5; 4.3; 4.3; 4.2 - CPI (period average): 20.2; 34.2; 14.5; 15.3; 13.6; 13.2; 10.3; 11.5 - Public gross nominal debt (percent of GDP): 53.3; 41.6; 38.4; 38.7; 36.6; 34.6; 34.2; 32.4 - Current account balance (incl. budget support, percent of GDP): -8.6; -6.6; -6.0; -5.4; -5.2; -5.3; -4.8; -4.6 - Gross international reserves (US$ million): 191.3; 213.9; 296.8; 298.5; 360.8; 392.0; 478.3; 511.7 - Revenue and grants (percent of GDP): 19.9; 16.5; 17.2; 18.0; 18.1; 18.5; 18.9; 19.3 ### Institutional and programmatic notes - Strengthening of BRB operational frameworks, PFM, debt management, and anti-corruption institutions are cross-cutting enablers for macroeconomic stability and reforms. - Capacity development: CD spending has increased with concentration in fiscal and monetary workstreams; FY2025 saw PFM, Macro-Fiscal Policies and Revenue Administration leading CD spending. ### Administrative note - It is proposed that the next Article IV consultation with Burundi take place on the standard 12-month cycle. *Source: IMF staff report excerpts and tables contained in the provided Burundi country chapter.* ### Annex I. Implementation of Past IMF Recommendations ### Annex I. Implementation of Past IMF Recommendations ### FISCAL & DEBT - Fund advice: - Tighten the fiscal stance and reduce monetary financing. - Improve expenditure efficiency, advance PFM reforms, reduce exemptions, broaden the tax base, and enhance compliance via digitalization. - Maintain prudent debt management focused on grants and concessional borrowing. - Improve monitoring and prevention of domestic arrears. - Comments on implementation: - Partially implemented. Authorities launched a medium-term fiscal framework in 2025 aiming at tightening the fiscal stance to reduce reliance on monetary financing. Recourse to BRB financing has been minimal so far in FY25/26. - Partially implemented. Various PFM reforms undertaken last year will give tools to improve expenditure efficiency. A plan is being rolled out by OBR to improve tax administration and compliance and deploy digital collection tools. No progress has been made conversely on reducing tax exemptions and on widening the tax base. - Implemented. Debt management has remained prudent and measures have been taken to develop a secondary market of government securities. - Not yet implemented. A clear framework for managing domestic arrears management is still lacking. ### FOREIGN EXCHANGE & MONETARY - Fund advice: - Accelerate FX unification and move to a flexible exchange rate regime; remove FX restrictions. - Tighten monetary policy via lower money growth, higher policy rates, and quantitative tightening. - Develop a transitional monetary framework toward inflation targeting. Use a policy rate anchor and improve communication to guide expectations. - Comments on implementation: - Not implemented. Persistent FX distortions undermine activity. FX restrictions have been maintained. - Not yet implemented. The monetary tightening observed since the last consultation has been driven by the tighter fiscal stance and the interruption of monetary financing. Real policy rates have moved from deep negative territory to zero, but the move was entirely driven by disinflation: no official rate hike nor quantitative tightening have been implemented by the BRB in 2025 and so far in 2026. - Not yet implemented. While steps are taken to improve the forecasting function and policy communication further long term effort and technical assistance will be needed to support the transition to inflation targeting. ### GOVERNANCE - Fund advice: - Strengthen the rule of law, anti-corruption framework, and transparency (including procurement). - Enhance central bank governance through the implementation of safeguard assessment recommendations. - Improve SOE oversight and reduce fiscal risks. Consider performance-based management or private participation. - Comments on implementation: - Partially implemented. Authorities need to revamp their governance agenda relying on the forthcoming governance diagnostic report. Some progress is evident in the launch of an anti-corruption framework for the Burundian Revenue Authority. - Not yet implemented. Authorities still need to implement the recommendations from the latest safeguard assessment, including the publication of recently audited financial statements. - Partially implemented. Measures have been taken to improve the management and stakeholder control of SOEs (debt reporting, dividend payments), reduce waste and undue transfer of budget resources, and promote public private partnerships. ### STRUCTURAL - Fund advice: - Advance reforms to address productivity bottlenecks in agriculture, mining, infrastructure, and local markets. - Strengthen energy planning, transmission capacity, and energy sector governance. - Publish governance diagnostic report. - Reduce data gaps, improve availability of macroeconomic statistics and data transparency. - Comments on implementation: - Partially implemented. Authorities have taken measures to boost coffee production (closing the gap between exporting and international prices, planting of trees, improving agricultural techniques) and provided incentives for the formalization of the gold semi-artisanal sector (taxation, modalities of BRB purchases, financing for mechanization). - Partially implemented. Authorities are actively working towards concluding a USD1.5 bln PPP agreement to undertake a large transmission and distribution project. The regulatory framework for energy is being overhauled in the context of the WB-sponsored Energy Compact. - Partially implemented. Authorities have provided feedback to the draft GDA and subsequent publication is being considered. - Partially implemented. Authorities continue advancing the data adequacy agenda with support from ongoing Fund TA. ### FINANCIAL - Fund advice: - Strengthen the monitoring of FX exposure risks and enhance bank supervision. - Conduct an asset quality review and address sovereign-bank nexus through stress testing and prudential tools. - Enhance financial inclusion and digitalization of payment systems. Reduce cash reliance and support credit deepening. - Comments on implementation: - Partially implemented. Limited progress in measuring and managing FX risks which constraints balance sheet vulnerability assessment. Most FSSR recommendations have been implemented. Authorities are stepping up efforts to monitor commercial banks FX arrears and net open positions. - Not implemented. The asset quality review is still pending due to BRB capacity constraints. - Implemented. Progress made by the BRB and the banking industry in developing digital payment solutions accessible by mobile phones, and in promoting inter-operability of payment systems. *Source: Annex I. Implementation of Past IMF Recommendations (2025 Article IV Consultation).* --- ### Annex II. Risk Assessment Matrix ### Conjunctural Risks - Geopolitical Tensions and Intensification of Conflicts - Likelihood: High - Expected Impact on the Economy: High. Heightened geopolitical tensions could affect maritime routes that jeopardize exports of Burundi. A deepening of geopolitical conflicts that could reduce FX reserves inflows could jeopardize macroeconomic balance. - Policy Response: Strengthen contingency planning, and maintain macroeconomic stability through tight monetary policy and fiscal policies to buffer the external shocks. - Commodity Price Volatility - Likelihood: High - Expected Impact on the Economy: Low. Burundi’s dependence on food and fuel commodity imports is limited, with the country relying heavily on local subsistence agriculture. High fertilizer prices could dent agricultural yields but increases in global commodity prices of gold could boost the country’s exports and support economic growth and reserves accumulation. - Policy Response: Reform monetary and exchange rate policies. Develop and strengthen domestic subsistence agriculture through structural reforms to enhance agricultural productivity of agriculture and formalize gold production. - Fiscal Vulnerabilities and Higher Interest Rates - Likelihood: High - Expected Impact on the Economy: Low. The increase of global interest rates may lead to a reduction of capital flows to Burundi. The effect of Burundi’s debt and prospective new debt would be moderate given the relatively low ratio of debt to GDP, its lack of access to international market, and its potential access to concessional funding. - Policy Response: Exchange rate unification would facilitate aid inflows and create potential for private sector FDIs. To this end tighten monetary policy and stabilize public finances. Deploy structural reform across sectors to reinforce private sector led-initiatives. ### Structural Risks - Social Discontent - Likelihood: Medium - Expected Impact on the Economy: Medium. Labor informality and low productivity-low paying jobs in agriculture continue being two priority problems in Burundi. While there is no evidence of social discontent, low economic opportunities for the population are a latent risk. - Policy Response: Promote reforms that support the business environment and facilitate the work of enterprises, specially micro and small and promote higher productivity segments (like mechanized mining and electrification) to mitigate underemployment in subsistence agriculture. - Labor Shortages and Remittances - Likelihood: High - Expected Impact on the Economy: Low. Remittances represent still a small share of GDP in Burundi (less than 4%). While they do support those who receive them, they are not fundamental to boost aggregate consumption or mitigate external imbalances, and therefore are not macro-critical. - Policy Response: Foster financial inclusion reforms that facilitate the access to remittances. - Climate Change - Likelihood: Medium - Expected Impact on the Economy: Medium. Most of the production of Burundi is based on agriculture (export and subsistence). As the country is prone to floods, droughts and landslides, the occurrence of natural disasters that affect local agriculture production is macro-critical. - Policy Response: Reinforcement of emergency preparedness mechanisms and prevention tools (weather forecast, communication with communities, reallocation), measures to promote—and investments in—risk reduction and resilience, including climate-resilient infrastructure, water resources management and climate-smart agriculture, and strengthening social protection mechanisms. ### Domestic Risks - Fiscal slippages (including upcoming Presidential elections in May 2027) - Likelihood: Medium - Expected Impact on the Economy: High. Could lead to increased monetary financing and higher inflation. - Policy Response: Enhance fiscal transparency, budget oversight and monetary independence to avoid that lack of timely spending and revenue monitoring provides an opportunity for slippages and relapse to monetary financing. - Delays in FX and structural reforms - Likelihood: Medium - Expected Impact on the Economy: High. Persistent and potentially widening gap between the parallel and the official exchange rates; intensification of informality of trade; pressure on FX reserves. - Policy Response: Greater transparency of monetary policy, enhancing monetary policy and FX operations, instruments and active liquidity management, phase out regulations creating FX market distortions and privileged access to FX at the official rate. *Note: Likelihood categories reflect staff’s subjective assessment: “low” (below 10 percent), “medium” (10-30 percent), and “high” (30-50 percent). The RAM captures staff views as of the time of discussions with the authorities.* --- ### Annex III. External Sector Assessment ### Overall Assessment - The external position is assessed as substantially weaker than the level implied by fundamentals and desirable policies. - Drivers of the downgrade: import restrictions during part of 2025, foreign exchange reserves below adequacy levels, large over-valuation of the REER, and lingering distortions in the FX market. - Outlook: External imbalances are projected to slowly narrow under a baseline scenario supported by the authorities’ commitment to a tighter fiscal and monetary policy stance. - Key policy recommendations: - Ambitious exchange rate policy reforms aimed at reducing FX shortages and promoting a market-based exchange rate. - Fiscal adjustment and measures to improve competitiveness (including labor market reform). - Promote transformative structural reforms in agriculture, financial sector, energy. - Seek development partners’ support to provide additional FX reserves. ### Foreign Assets and Liabilities: Position and Trajectory - Background figures: - NIIP/GDP estimated at -60% of GDP in 2025 (from -77% in 2024 and -83% in 2023). - Total foreign assets estimated at USD 1,110 million in 2025. - Total liabilities reached USD 5,233 million in 2025. - Assessment: - The magnitude of the NIIP poses a risk to external sustainability. - Successful policy reforms (pending FX unification, fiscal consolidation, cessation of monetary financing) should increase FX reserves through higher formal exports, FDI and foreign aid. - Formalization of external assets held informally could help bring NIIP to more sustainable levels over the medium run. ### Current Account - Background and recent outcomes: - Current account deficit (CAD) in 2025: 6.6 percent of GDP (improvement from 8.6 percent in 2024). - CAD averaged 12.8 percent of GDP during 2020–2024. - Drivers in 2025: tighter fiscal policy reducing absorption, higher coffee and gold prices boosting exports; gold exports up to 1.2 tons vs. 0.4 tons in 2024. - Remittances grew 15 percent in 2025 and amounted to 3.6 percent of GDP. - FX reserves rebuilt limited buffers since mid-2025 after extreme reserve scarcity following the ECF expiry and non-disbursement of contingent loans from other IFIs. - Projections: - Baseline projections suggest reserve coverage could surpass 2.5 months of next year’s imports by 2030, predicated on continuing positive external conditions and adequate domestic policies. - Export revenues projected to increase in the medium term owing to higher commodity prices (gold, coffee, tea, beer). - Assessment: - Current account norm estimated at -4.7 percent of GDP. - Actual cyclically adjusted CA deficit: 8.3 percent. - EBA-lite CA model indicates a negative CA gap of 3.6 percent of GDP in 2025. - FX reserves at 1.6 months of imports fall short of the ARA metric of 3.5 months. - Fiscal policy: deficit of 5.5 percent of GDP in 2025. - FX market distortions: premium remains at around 100 percent, encouraging illegal exports and creating disincentives for investors. - Staff assess the external position as substantially weaker than medium-term fundamentals and desirable policies. ### Real Exchange Rate (REER) - Background: - REER appreciating trend for more than 10 years, with an unprecedented sharp pace in 2025. - 2025 REER appreciated 29 percent relative to one year earlier. - Assessment: - REER overvaluation implied by EBA-lite current account model: 71.8 percent (using semi-elasticity of -0.1). - REER model suggests an overvaluation of 49 percent relative to the norm. - Parallel FX market premium declined to 100 percent at end-2025 from a much wider gap in 2024. - CPI inflation averaged 34 percent in 2025; end-of-year inflation retreated to 15.2 percent y/y. - Real overvaluation during 2025 reflects higher local prices relative to the rest of the world. - Policy priority: close monitoring of FX market conditions, monetary policy and price outcomes, and implementation of tighter fiscal measures to promote external competitiveness. ### Capital and Financial Accounts: Flows and Policy Measures - Background: - 2025 CA deficit largely financed by inflows. - Financial and capital accounts slightly improved relative to 2024 due to larger net trade credit liabilities, FDI and project grants. - FDI: 0.5 percent of GDP in 2025; projected to increase to an estimate of 2 percent towards 2030. - Assessment and policy recommendations: - Removal of FX control measures within a policy reform framework and timeline would improve the financial account by attracting more private flows. - Improve frequency and quality of financial account data provision, notably on foreign investments and imports financing. ### FX Intervention and Reserves Level - Background: - FX reserves of the BRB in 2025: US$ 214 million, a 12 percent increase from the 2024 level of US$191 million. - Historical declining stock of reserves is starting to reverse due to authorities’ policy actions and the positive external environment. - FX reserves measured in months of next year’s imports have seen a gradual increase (coverage projections noted above). *Source: Annex III. External Sector Assessment (IMF staff analysis).* ### 1.6 in 2025. While the BRB continues to deal with low ### 1.6 in 2025. While the BRB continues to deal with low ### FX buffers, central bank actions, and reserve adequacy - Monetary financing has ceased since July 2025. - The BRB is attempting to activate the interbank money market through facilitating financial transactions on a new platform. - A dual FX market persists, with a premium estimated at 100 percent, preventing exports from reaching full potential, reducing FX accumulation, and limiting investor confidence. - Assessment and reserve guidance: - The IMF’s reserve adequacy metric for credit-constrained economies accounts for the cost of carrying reserves, probability of a large shock, and the cost of a reversal of flows. - Considering higher costs of holding reserves and a shock-prone environment, the optimal reserve coverage ratio is between 3.5 and 4.6 months of imports. - Consistent with this range, the reserve level should be kept at a minimum of 3.5 months of imports. ### Macroeconomic Stabilization Plan 2025–27: objectives and pillars - Objective: - Restore macroeconomic stability by reducing inflationary pressures, narrowing fiscal and external imbalances, while supporting inclusive growth. - Fiscal policy (consolidation and sustainability): - Strengthen domestic revenue mobilization through tax policy and administration reforms, including rationalization of tax expenditures. - Enhance spending efficiency, contain non-priority outlays, strengthen oversight of state-owned enterprises, and safeguard priority social and capital spending. - Reinforce medium-term fiscal planning and debt management. - Monetary policy (contain inflation and safeguard stability): - Maintain a tighter and more disciplined monetary policy stance; improve liquidity management and monetary transmission. - Strengthen coordination between monetary and fiscal policies to avoid macroeconomic inconsistencies and enhance the effectiveness of stabilization instruments. - Address financial stability challenges by advancing digitalization of the financial system, strengthening macroprudential oversight, and assessing financial asset quality. - Complete foreign exchange reforms, notably market liberalization and unification of the exchange rate, and diversify foreign exchange inflows through higher exports and foreign direct investment. - Structural policies: - Transform agricultural and mining sectors, promote local value chains, and improve the business climate. - In agriculture: raise productivity and reduce dependence on imports. - In mining: expand geological coverage and improve contract governance. - Governance: - Strengthen governance, transparency, and anti-corruption frameworks as cross-cutting objectives to improve policy effectiveness and credibility of the macroeconomic adjustment framework. ### Reserve and financial-account context (visual data referenced) - Charts show reserves in US$ Millions and reserves in months of next year's imports (RHS) for 2015–2025. - Financial account composition (percent of GDP) shows Portfolio investment, Direct investment, Other investment, and Financial account for 2020–2025. ### Tax expenditures: background and magnitude - Tax revenue context: - The tax-to-revenue ratio in Burundi has been stable over the long term, reaching 87 percent in 2025. - Burundi’s tax revenue remains below its estimated tax potential (Text Figure 1). - Burundi’s estimated tax expenditures exceed the regional average (Text Figure 2), indicating relatively high revenue losses from exemptions and incentives. - Legal framework regulating exemptions: - Framework components: constitution of Burundi; investment code; value-add tax (VAT) Law; manual of procedures in granting exemptions; exemptions under international and regional agreements (Vienna Convention, EAC custom agreements). - The annual budget law sets a limit of exemptions to be granted during the fiscal year. - Beneficiaries include investors, non-governmental organizations, non-profit associations, embassies and diplomats, international organizations, members of the government and of the parliament. - Exempted goods include medicinal & pharmaceutical products, vaccines, raw materials for manufacturing of medicinal products, veterinary products, and agricultural inputs. - Stock taking and magnitude: - The amount of tax exemptions has been large and increased rapidly over the last 10 years. - In 2024/2025, exemptions reached BIF 225.19 billion (about 1.5 percent of GDP or 9.3 percent of revenues). - Exemptions have increased in nominal terms since 2015 but remained broadly stable as a share of GDP and revenues. - In 2024/2025, exemptions projected in the budget were BIF 109.65 billion, but the government granted a total amount of exemptions of BIF 225.19 billion. - In the same period, the government missed its revenue target by BIF 111.51 billion. - Composition of exemptions (2024/2025): - By tax category (percentage): - Value Added Tax: 66.7 - Import Duties: 22.0 - Excise Duties: 0.3% - Specific Fuel Taxes: 0.5% - Consumption Tax on Sugar: 0% - By beneficiary category (percentage): - External financing: 38% - Investors: 32% - Gov Entities: 24% - Others: 6% ### Tax-expenditure policy recommendations - Strengthen tax expenditure reporting and undertake systematic review of exemptions to ensure they are well targeted, cost-effective, and aligned with policy priorities and fiscal constraints. - Short-run priorities for domestic revenue mobilization: - Focus on VAT reform (the largest source of tax revenue). - Reduce the VAT registration thresholds. - Review and eliminate unnecessary VAT exemptions. - Reduce the number of items taxed at the reduced VAT rate to yield additional revenues, help formalize economic activity, and improve the efficiency of the tax system. *Source: Burundi authorities; IMF staff estimates and projections; IMF staff calculations as presented in the source content.* ### Annex VI. Opportunities, Challenges and Reform Avenues for the ### Annex VI. Opportunities, Challenges and Reform Avenues for the Artisanal Gold Mining Sector in Burundi ### Recent Developments and Outlook - Gold is the largest mineral export in Burundi, accounting for 41 percent of total merchandise goods in 2025. - Mining production is dominated by artisanal and small-scale mining, with limited (although growing) industrial activity. - Official mining sector contribution to GDP remains below 1 percent of GDP. - Gold prices have more than doubled since 2023, reaching $4,500 per troy ounce at end-2025. - Combined price and a three-fold volume expansion boosted exports markedly in 2025. - During the second half of 2025, inflows of USD to the parallel market supported a 20 percent appreciation of the Burundi Franc (BIF) vs. dollar. - Key policy and regulatory changes: - New Mining Code promulgated in August 2023; decrees operationalizing the new code taken in 2025. - BRB initiative to purchase gold in U.S. dollars to domestic producers starting in 2024 changed incentives for formal market participation. - Mapping campaign of mining activities and encouragement of gradual mechanization of selected sites started in 2025. - Tax and legal changes under the 2023 code: - Ad-valorem tax for ASGM maintained at 1%. - Lower State take from gold mining production by cooperatives set at 7%. - Restrained public official participation in mining cooperatives. - Outlook: - Prospects for gold exports are positive if elevated prices persist and semi-mechanization of cooperatives continues. - Formalization efforts and investment could further increase gold production volume, though the sector is likely to remain small-scale due to low proven reserves and limited infrastructure. ### ASGM Formalization: Challenges and Opportunities - Common structural challenges at different stages of the value chain: Production stage: - Limited information on payments to cooperative members and assay process to individual producers; lack of laboratory capacity to evaluate mineral concentration. - Limited knowledge of geology and gold reserve availability; poor cadastral and land registries. - Limited financial inclusion to avoid cash payments and monitor payment transfers to local producers. - Limited access to production inputs (chemicals like mercury), capacitation and environmental mitigation. Commercialization stage: - Potential conflicts of interests since comptoirs can be sellers, buyers and exporters. - Payments in USD create pressure in the FX market. Export stage: - Balance sheet risk for the central bank during the gold holding period (quasi-fiscal risk). - Risk of low FX repatriation by licensed exporters. - Market and policy environment opportunities: - Current policy mix conducive to narrowing the FX premium will gradually reduce incentives for informality. - Purchase of gold in domestic currency by the BRB (permitted by FX unification) would facilitate miners’ operations, access to imports for production (chemicals), access to credit with local commercial banks, and accelerate semi-mechanization. - Leakage and scale indicators: - In 2023, Burundi official gold exports were only a quarter of trading partner data reporting gold imports from Burundi (definition: missing exports as mirror imports minus reported exports). - Private sector consultants estimate Burundi’s overall ASGM production at between 3 and 4 metric tons per year. - BRB exported 1.2 metric tons in 2025 despite its monopoly. ### Formalization of ASGM: Peer Countries’ Experiences - Domestic Gold Purchasing Programs (DGPP) have aided formalization in peer SSA countries; models differ: - Burkina Faso: autonomous government agency (SONASP) handles DGPP; fiscal budget bears purchase risk; gold flows to regional reserves; payments in domestic currency with a price premium relative to spot. - Ethiopia: central bank direct purchases from producers; central bank bears balance sheet risk; payments in domestic currency with a price premium relative to spot. - Ghana: intermediary (GoldBod) between producers and central bank; central bank still liable for purchases; payments in domestic currency with a price premium; Ghana’s model featured successful formalization after GoldBod creation. - Key comparative notes: - Central bank balance sheet risk: No in Burkina Faso (risk on fiscal budget through SONASP*), Yes in Ethiopia and Ghana, TBC for Burundi. - Gold to reserves: Yes in Burkina Faso (to regional reserves), Yes in Ethiopia, Yes in Ghana, Yes in Burundi (memo notes FX reserve accumulation transitory as flows out to ASGM producers). - Price modalities in Burundi: haircut of 7%-10% relative to spot price and payment in US$ (as practiced). - Empirical indicator: - Memo: Missing Gold Exports (% of Reported Gold Exports) in 2023: Burkina Faso 4.5, Ghana 4.376, Ethiopia n.a., Burundi figure implied high but specific percent not provided here. ### Potential Reform Avenues to Support and Formalize ASGM - Institutional framework and transparency: - Enhance transparency building on the mining sector dashboard at Office Burundais des Mines (OBM). - Consider joining the Extractive Industries Transparency Initiative (EITI) to strengthen disclosure of mining contracts and operations. - Improve transparency in price setting mechanisms and gold assay, including setting up local capabilities to analyze concentration and grade. - Continue progress in governance, oversight, and regulatory stability to support investment and financing for machinery. - BRB gold purchase invoicing, growth, and financial inclusion: - Increase transparency on BRB gold purchase operations and local currency invoicing to align sectoral policies with macroeconomic objectives. - In a context of wide availability of FX and unrestricted FX operations, artisanal miners should be indifferent to invoicing currency; narrowing FX premium and eventual unification would allow BRB to purchase in local currency, impacting reserve accumulation. - Implement mechanisms to guarantee health and safety of sector actors, mitigate environmental impact, and prevent abusive labor practices; address elevated risks of mercury pollution. - Foster inclusive financing and access to credit for gold miners; small cooperatives cite difficult access to credit and regulatory instability as causes for under-investment and low yields. - Operational and revenue modalities (as currently observed and reformed since 2013 and 2023): - Production sold through cooperatives to licensed trading posts (Comptoirs) and BRB. - Price set practice: typically a haircut relative to London spot (modalities have included price set 10% below London spot in practice). - Fiscal modalities: 7% royalty tax and 1% ad-valorem tax for artisanal production. - Selected leakage risks documented across stages include unclear payment timing leading to cross-border surrendering of gold, rudimentary production technology, weak capacity building, environmental risks (mercury), misinvoicing, potential conflicts of interest between comptoirs and cooperatives, quasi-fiscal risk for the BRB of selling at a price lower than local purchase price, and potential lower FX repatriation by exporters. *Source: IMF staff compilation from Annex VI of the provided document.* ### Annex VIII. FX Unification Scenarios ### Annex VIII. FX Unification Scenarios ### Overview - Annex summarizes three staff scenarios for FX market liberalization and exchange rate unification. - Scenarios differ by: speed of official rate adjustment; mechanism to close the parallel–official gap; implied policy mix (monetary/fiscal tightening and supporting structural measures). - All three scenarios could be followed by either a full floating exchange rate or a hybrid semi-managed exchange rate. ### Scenario I: “One‑Off” Official Rate Adjustment - Policy action: - The official exchange rate is reset to the “equilibrium” level through a one‑off devaluation of about 97 percent. - Unification completed by additional measures that progressively bring the parallel rate toward the official rate, with the residual premium reduced to zero over time. - Intended effects: - Rapid realignment of expectations and incentives. - Quick normalization of FX supply, including greater formalization of FX receipts and stronger export supply response. - Key transition risks: - Balance‑sheet exposure to FX movements (notably in the financial sector). - Potential social impacts from relative‑price changes on some imports and associated budgetary mitigation costs. - Immediate increase in local‑currency value of external debt, potentially weakening solvency indicators even as liquidity indicators may improve. - Risk if the new exchange rate is not adjusted over time in line with changes in the real effective exchange rate. ### Scenario II: “Gradual” Official Rate Adjustment (Crawling Peg) - Policy action: - Announced gradual depreciation path for the official exchange rate, aiming to close the REER gap by early 2028. - Parallel rate assumed to converge gradually toward equilibrium; unification occurs once equilibrium reached. - Intended effects: - Provides time to adjust fiscal and monetary policies and to smooth near‑term social impacts (including more gradual administered price adjustments). - Allows banks time to reduce open FX positions. - Trade‑offs and risks: - Distortions persist for longer; FX shortages and the premium can remain material during the transition. - Reserve accumulation is expected to be slower than under a one‑off adjustment. - Key risk: if the parallel rate increases faster than the official crawl due to still‑high inflation or external shock, credibility of the reform is undermined, slowing FX inflows and delaying convergence. - Staff note on equilibria calculation: - The equilibrium exchange rate as of March 2026 is assumed to be around 70% above the current official rate, estimated by averaging REER gap based on the EBA-Lite CA method (64 percent), REER method (50 percent) and the PPP exchange rate (90 percent). The cumulative projected inflation differential is factored in when calculating the required devaluation to close the REER gap in the future. ### Scenario III: Parallel Rate Converges to the Official Rate Through Robust Policies - Policy action: - Official rate remains fixed at current rate; adoption of tight macroeconomic policies and robust structural reforms to bring the parallel rate down to match the official exchange rate. - Entails quantitative monetary tightening and positive real interest rates, fiscal surpluses, and supporting structural measures to reduce domestic liquidity and FX demand. - Macroeconomic costs and outcomes: - Significant macroeconomic costs: sustained tightening is strongly deflationary with negative economic growth resulting in a GDP that is about 20% smaller than the baseline after 3 years. - Large‑scale liquidity tightening could undermine financial stability. - Foreign reserve coverage improves only gradually while a substantial premium persists during the transition. - Staff quantitative estimates and empirical approach: - Staff employed an elasticity‑based approach tracing causal transmission from fiscal deficit to parallel market rate via monetary sector, decomposed into three links and estimated on quarterly data using OLS with HAC standard errors (Newey-West, 3 lags). - Equations estimated: - Parallel rate depreciation linked to reserve money growth, controlling for official exchange rate, real GDP growth and changes in net foreign assets. - Reserve money growth linked to central bank financing of the deficit as a share of annual GDP, changes in credit to the private sector, and other central bank balance sheet items. - Central bank financing of the deficit decomposed into total deficit and share financed by the banking system; measures fraction of deficit monetized. - Inflation equation linking inflation to reserve money growth, real GDP growth and changes in net foreign assets (captures direct and indirect effects). - Growth equation linking real GDP growth to fiscal deficit. - Estimated elasticities are based on quarterly data over 2016-2025 (Text Table 1; source INSBU and BRB; IMF staff calculations). - Numerical implications to close parallel‑market premium within 12 quarters (3 years): - Bringing parallel rate from 6’100 BIF/USD to around 3’184 BIF/USD over 12 quarters implies an appreciation of around 48%. - Achieving this would require: - A sustained reduction in year‑on‑year reserve money growth of roughly 30 percentage points relative to baseline. - Implies a money supply that is 60 percent lower than the baseline. - Corresponds to a quarterly reduction in monetized deficit of about 5.7 percentage points of GDP and an overall fiscal adjustment of about 10.8 percentage points of GDP. - Implied macroeconomic costs: - Real GDP expected to decline by about 20 percent relative to baseline. - Price level expected to decline by about 28 percent relative to baseline. - Staff note: These reduced‑form estimates suggest closing the parallel‑market gap within three years through fiscal‑monetary tightening alone would require implausibly large adjustment, indicating tightening by itself is unlikely to be sufficient. - Staff baseline projections referenced: - Over the period 2027-2029, staff baseline projects an average growth rate of 4.3 percent. - Staff baseline projects an average real growth of 4.3 percent, an average annual inflation of 14 percent and an average reserve money growth of 15.6 percent. ### Overall Assessment and Policy Guidance - Trade‑offs summarized: - Scenario I (discrete official adjustment) compresses distortions quickly but concentrates transition risks and requires strong mitigation measures. - Scenario II (crawling peg) spreads adjustment and may reduce near‑term social and balance‑sheet disruption but risks prolonging shortages and widening the premium if the parallel market moves faster. - Scenario III (disinflation‑led) avoids nominal change in official rate but implies exceptionally large fiscal and monetary tightening with potentially high output and financial‑stability costs. - Required coherent package across scenarios: - Clear exchange rate strategy (including chosen speed of adjustment). - Supporting fiscal and monetary policies consistent with disinflation and external rebalancing. - Measures to strengthen FX supply and confidence during transition. - Temporary capital flow measures or targeted restrictions on specific transactions could help mitigate unintended effects of unification. - Sequencing should be anchored in macro‑stabilization objectives and calibrated to social and macro‑financial vulnerabilities, including the banking sector’s FX exposure. - Regime choice after unification: - All three scenarios could be followed by full floating or a hybrid semi‑managed regime. - A floating exchange rate following re‑alignment is most plausible given paucity of FX reserves and would help guard against re‑emergence of an FX premium. - A hybrid fixed regime with frequent re‑alignment post devaluation could also be an option. - Tactical point on initial devaluation: - In a “one‑off” adjustment, the initial movement is designed to move toward the parallel rate to close the gap; an initial “overshooting” (setting rate deliberately beyond the assumed “equilibrium”) could permit upfront accumulation of FX reserves and may have tactical merit. *Source: Annex VIII. FX Unification Scenarios, IMF staff calculations (1bdiea2026001 - Annex VIII. FX Unification Scenarios).* ### 4.5 percent by 2031 (-4.6 in baseline). Reserve coverage in months of imports would fall to 1.2 in 2026 with ### 1bdiea2026001 - 4.5 percent by 2031 (-4.6 in baseline). Reserve coverage in months of imports would fall to 1.2 in 2026 with ### Downside scenario: macroeconomic impacts (2026–31) - Reserve coverage in months of imports would fall to 1.2 in 2026 with a continuous drain to 0.8 by 2031 (vs. 2.8 in baseline). - Growth: - Deteriorates to 3.3 percent in 2026 and 3.4 percent in 2027 (from 3.9 and 4.2 percent, respectively, in the baseline). - Average growth over 2026-31 would stand at 3.3 percent (about 1 percent below baseline). - Inflation: - Rises to 17.6 percent in 2026 and 27.7 percent in 2027 (from 14.5 and 15.3 in the baseline). - Inflation then remains elevated fueled by the central bank deficit financing. - Financial sector and credit: - Lower growth, higher inflation, and negative real rates would weaken banks’ balance sheet. - Supply chain disruptions from acute FX shortages would increase NPLs, undermining credit growth and weighing on the capital buffers of the banking system. - Commodity price shock effect (Middle East conflict channel): - Crude prices assumed to increase by 25% and food prices by 3% on average in 2026 relative to the baseline. - Passthrough assumptions: 70% from oil prices to transport prices; 40% from international food prices to domestic food prices. - CPI basket weight application results in inflation increasing by 3pp from transport prices and 1.3pp from food prices. - Additional feedback effect of 0.9pp from transport prices to domestic food prices. - The overall effect on inflation is around +3pp relative to the baseline. ### Text Table 3 — Downside Scenario: Main Assumptions and Policies - Global Assumptions: - Price shock in 2026 relative to baseline that slowly converges to baseline in 2031: - Deterioration in the prices of gold, coffee and tea (-25%, -10% and -10%, respectively). - 25% higher oil prices - 22% higher fertilizer prices - 5% higher international food prices - Global growth lower by 0.5% - Global inflation higher by 0.5% relative to baseline in 2026 and 0.1% in 2027. - Lower economic growth across sectors due to: constraints to import (due to limited FX inflows and higher import prices), lower agricultural yields (fertilizer shock), lower domestic demand, off-track paths for reforms. - FDI flows dry up due to the slower pace of reforms (0.5% of GDP lower each year). - Macroeconomic Policies: - The deficit is fully financed by the central bank. - Progress towards FX unification is delayed. - Structural Reforms: - Delays in structural reform implementations across sectors due to constrained capacity: agriculture, electrification, gold mining, fuel price liberalization, financial sector. - Contingency note: - The authorities’ reform momentum comes under pressure in this scenario but policy commitments are partly maintained, with the only exception of a monetary financing relapse brought about by weak revenues and disruptions in the local security market (from high inflation and growth slowdown). ### Selected macroeconomic indicators across scenarios (excerpted values, 2025–31) - Real GDP (annual percentage change) — sample values from table: - 2025: Base 4.2 Down 4.2 Up 4.2 - 2026: Base 3.9 Down 3.3 Up 4.7 - 2027: Base 4.2 Down 3.4 Up 4.8 - 2031: Base 4.2 Down 2.9 Up 8.4 - CPI (period average) — sample values from table: - 2025: 34.2 (Base, Down, Up all 34.2) - 2026: Base 14.5 Down 17.6 Up 14.5 - 2027: Base 15.3 Down 27.7 Up 12.5 - 2031: Base 18.0 Down 7.9 Up 11.5 - Revenue and grants (percent of GDP) — sample values: - 2025: 16.5 (Base, Down, Up all 16.5) - 2026: Base 17.2 Down 17.3 Up 17.3 - 2028: Base 18.0 Down 19.3 Up 18.1 - Expenditure (percent of GDP) — sample values: - 2025: 22.0 (Base, Down, Up all 22.0) - 2026: Base 20.6 Down 20.6 Up 20.6 - 2028: Base 21.4 Down 22.0 Up 21.8 - Overall fiscal balance (percent of GDP) — sample values: - 2025: -5.5 (Base, Down, Up all -5.5) - 2026: Base -3.4 Down -3.3 Up -3.3 - 2028: Base -3.6 Down -3.3 Up -2.9 - Public Debt (Gross Nominal Public Debt, percent of GDP) — sample values: - 2025: 41.6 (Base, Down, Up all 41.6) - 2026: Base 38.4 Down 38.1 Up 38.0 - 2027: Base 38.7 Down 35.3 Up 48.4 - 2031: Base 32.4 Down 24.6 Up 31.1 - of which: external — sample values: 10.8 (2025); 9.3 (2026 base); 8.6 (2028 base) - Current Account Balance (CAB, % of GDP) — sample values: - 2025: -6.6 (Base, Down, Up all -6.6) - 2026: Base -6.0 Down -7.6 Up -5.6 - 2028: Base -5.3 Down -5.9 Up -4.4 - Gross International Reserves (GIR, months of MGS) — sample values: - 2025: 1.6 (Base) - 2026: 2.0 (Base) 1.2 (Down) 2.4 (Up) - 2027: 1.9 (Base) 0.6 (Down) 3.1 (Up) - 2031: 2.8 (Base) 0.8 (Down) 4.2 (Up) ### Figures and trajectories (selected series referenced) - Charts provided cover: - Real GDP growth across Scenarios, 2018–31 (year-on-year, % change) - Average CPI Inflation across Scenarios, 2018–31 (year-on-year, % change) - Gross International Reserves, 2018–31 (USD$ Millions) - Public Debt across Scenarios, 2018–31 (Percent of GDP) - Monetary Base, 2018–31 (In millions of Burundi Francs) - Series indicate the downside scenario tracks lower growth, higher inflation, and sharply lower GIR relative to baseline and upside scenarios through 2031. ### Annex XI — Medium-Term Budget Framework (MTBF) for FY2025/26–2028/29 (authorities’ projections vs staff) - Cabinet approved MTBF assumptions are more optimistic than staff’s baseline and assume ambitious reform execution. - Authorities’ projections (selected): - Growth: 7.7 percent average annual growth for 2026-29 (authorities project 5.5, 6.8, 4.2, 8.3, 4.5, 10.2, 4.3 in table cells labeled Authorities across years). - External: By 2028, gold exports projected to exceed 5.6 tons—four times staff’s baseline projection. - FDIs expected to reach 3 percent of GDP. - Reserve coverage would improve to 4.5 months of imports by FY26/27. - Inflation: A sharp decline to 8 percent in 2026. - Fiscal: Tight fiscal stance through FY2028/29, reducing public debt from 35.3 percent of GDP in FY2026/27 to 26.2 percent in FY2028/29. - Text Table 1 (MTBF and Staff Baseline Projections, 2026–2029) — sample comparisons: - Real GDP: Authorities 5.5 Staff 3.9; Authorities 6.8 Staff 4.2; Authorities 8.3 Staff 4.5; Authorities 10.2 Staff 4.3 - CPI (period average): Authorities 8.0 Staff 14.5; Authorities 8.0 Staff 15.3; Authorities 8.0 Staff 13.6; Authorities 8.0 Staff 13.2 - Revenue and grants (percent of GDP): Authorities 22.2 Staff 17.2 (2026); Authorities 21.0 Staff 18.0 (2027) - Expenditure (percent of GDP): Authorities 23.7 Staff 20.6 (2026); Authorities 22.9 Staff 21.4 (2027) - Primary balance (percent of GDP): Authorities -0.3 Staff -2.1 (2026) - Overall balance (percent of GDP): Authorities -1.5 Staff -3.4 (2026) - Public debt (percent of GDP): Authorities 48.1 Staff 38.4 (2026); Authorities 35.3 Staff 38.7 (2028) - GIR (months of imports): Authorities 2.6 Staff 2.0 (2026); Authorities 4.5 Staff 1.9 (2028) - Divergence drivers between staff and authorities: - Different assumptions (staff projections reflect the effect of the war). - Different goal of the planning framework (authorities’ projections reflect some policy goals rather than a likely baseline). - Data compilation discrepancies. - Authorities’ baseline scenario is comparable to staff’s upside scenario. *Source: IMF staff estimates and projections as presented in the provided content.* ### Annex XII. Data Issues ### Annex XII. Data Issues ### Data adequacy assessment (sectoral ratings and summary) - Median Rating heatmap string: CBCCBBC - Sectoral Questionnaire Results (selected cells as reported): - National Accounts: Coverage = B B D B B; Consistency = B D; Frequency and Timeliness = C B B B B - Prices: Coverage = C C C B; Consistency = C C; Frequency and Timeliness = A - Government Finance Statistics: Coverage = C C C B; Consistency = D; Frequency and Timeliness = B - External Sector Statistics: Coverage = C C; Consistency = C C; Frequency and Timeliness = C - Monetary and Financial Statistics: Coverage = C C C B; Consistency = B D; Frequency and Timeliness = D - Inter-sectoral Consistency: Median cell references in questionnaire omitted where blank - Overall staff judgment statements: - "Data provision to the Fund has some shortcomings that somewhat hamper surveillance." - "The data provided to the Fund have serious shortcomings that significantly hamper surveillance." (used in heatmap legend) - The overall data adequacy assessment is based on staff's assessment of the adequacy of the country’s data for conducting analysis and formulating policy advice. ### Rationale for staff assessment — key deficiencies and characteristics - National accounts: - Compiled according to the 1993 System of National Accounts (SNA) with a base year of 2005. - Published with a typical lag of 6 months after the reference period. - Authorities are working on rebasing GDP and migrating to the 2008 SNA, with the first rebased data expected to be published by the end of 2025. - Fiscal statistics: - Lack granularity and coverage (e.g., data on public arrears), creating uncertainty in assessing fiscal risks and debt sustainability. - External Sector Statistics (BoP/IIP): - BoP reported with a delay of about 3 months after the reference period. - International Investment Position (IIP) only available on an annual basis and is not disseminated. - Specific problems identified: (i) Incorrect methodology leading to an overstimation of trade credits; (ii) Insufficient source data for direct investment flows and positions; (iii) External debt statistics compiled on a cash, rather than accrual, basis. - Improving frequency and quality of financial account data, notably on foreign investments and imports financing, is needed to enable a more accurate assessment of the external sector. - Monetary and financial statistics: - Compiled on a regular basis with large granularity and coverage of several banking subsectors. - Quality of banking supervision data, and in particular credit risk assessment of banks' portfolios (NPLs), was flagged as a potential risk. - Use of alternative/estimated data: - To estimate Burundi's Net International Investment Position in the External Sector Assessment, staff used mirrored data from creditor and debtor countries' NIIP, published by the Brookings Insitutition's External Wealth of Nation Database. - Other data gaps: - Staff analysis would benefit from having data on domestic arrears and expenditure-side GDP. ### Changes since last Article IV and corrective actions / capacity development priorities - Recent change flagged: - Quality of banking supervision data and credit risk assessment of bank portfolios (NPLs) identified as a potential risk; this is being addressed through technical assistance (TA). - Ongoing and planned corrective actions: - Two ongoing TA programs to improve monetary and financial sector data quality: - TA 1: Covers bank supervision and addresses credit risk assessment; expected to improve BRB capacity to assess the quality of NPLs data reported by banks. - TA 2: Aims at automating the process of collection of monetary and financial data based on banks reporting to improve quality and timeliness; implementation might affect time-series consistency and will be discussed with the BRB during the upcoming Article IV mission to understand and mitigate risks. - Corrective action for external sector statistics: - The Office Burundais des Recettes (OBR) needs to share the relevant information with the BRB to allow for a proper estimation of trade credits and a review of BOP data. - Technical assistance inventory (selected, delivery dates preserved as in source): - AFRITAC Centre (AFC): AT to support the INSBU in aligning the quarterly national accounts with the base year 2016, in accordance with the SNA 2008 — May-26. - AFRITAC Centre: TA to develop a guide for annual performance reporting (APR) — Apr-26. - AFRITAC Centre: TA to develop a risk based supervision and implement the MCM recommandations under the 2024 FSSR — 2026 Mar-26. - AFRITAC Centre: TA to finalise the implementation of an emergency liquidity provision framework (ELPF) — May-25. - FAD: Public Investment Management Assessment (PIMA) TA Mission, including C-PIMA module — Nov-25. - MCM: TA for Reference exchange rate analysis and FX operations framework — Oct-25. - STA: Capacity Development on Monetary and Financial Statistics (MFS) and Financial Soundness Indicators (FSI) — May-25. - Multiple TA items listed addressing: GDP rebasing to base year 2016, compilation of quarterly GDP at current prices, TOFE methodology in accordance with GFSM 2014, public debt statistics, external sector statistics (ESS), revenue forecasting, and capacity development for bank supervision and IRRBB. ### Implications for surveillance and analytical work - Data shortcomings impede precise assessment of fiscal risks, debt sustainability, and external position; specific implications include: - Lack of expenditure-side GDP and domestic arrears data increases uncertainty in fiscal vulnerability assessments. - IIP not disseminated and annual only: limits timely external position analysis. - Overestimation of trade credits and cash-basis external debt statistics bias external indebtedness and financing assessments. - Improvements in financial account data (foreign investments, import financing) are required to enhance external sector analysis. - Potential time-series breaks: - Reforms (rebasing to 2016 base year and migration to 2008 SNA, and automation of monetary and financial data collection) are expected to improve data quality but may introduce breaks in historical consistency; staff plan discussions with BRB to understand extent and mitigation. ### Key statistics and timelines preserved from source - Typical publication lag for national accounts: 6 months after the reference period. - IIP availability: annual only and not disseminated. - BoP reporting delay: about 3 months after the reference period. - Expected first publication of rebased GDP data: by the end of 2025. - TA delivery date examples: May-26, Apr-26, 2026 Mar-26, May-25, Nov-25, Oct-25, May-25, etc. (as listed in TA inventory). - Staff used mirrored NIIP data from the Brookings Insitutition's External Wealth of Nation Database for NIIP estimation. *Source: Annex XII. Data Issues, Burundi — Staff Report for the 2026 Article IV Consultation.* ### 28. Staff assesses Burundi’s debt as sustainable under the baseline scenario.Burundi is at ### 1bdiea2026001 - 28. Staff assesses Burundi’s debt as sustainable under the baseline scenario.Burundi is at ### Debt sustainability assessment (staff judgment) - Staff assesses Burundi’s debt as sustainable under the baseline scenario. - Risk ratings with judgment: - External debt distress: high risk. - Overall risk of debt distress: high. - Baseline external debt indicators: - All four external debt indicators remain below their thresholds under the baseline. - PV of baseline external debt-to-exports: 99 percent in 2025; projected 90 percent in 2026; 79 percent in 2027. - PV of total public debt-to-GDP: 39 percent in 2025; projected 37 percent in 2026–27; projected to fall below the 35 percent benchmark from 2029. - Customized downside scenario outcome: - Combines adverse terms-of-trade shocks, election-related fiscal slippage, and weaker growth. - PV of external debt-to-exports breaches the 140 percent threshold in 2026–28, peaking at 180 percent. - Debt service-to-exports ratio exceeds the 10 percent threshold through 2028. - Because of these stress-test outcomes, staff uses judgment to maintain the external risk rating at high. - Mitigating factors: - Domestic: strong nominal GDP dynamics and negative real interest rates. - External: favorable terms-of-trade outlook and prospects for progressive FX reform implementation. ### Downside risks (enumerated) - Commodity price reversal and oil price shocks: - A sharp decline in gold and coffee prices would reverse export gains and reduce FX inflows. - Further rise in oil prices would widen the current account deficit and deplete FX reserves. - The baseline relies heavily on the continued positive external environment. - Election-related fiscal slippages: - May 2027 presidential elections could generate spending pressures and undo fiscal consolidation and the monetary financing moratorium. - Delays in FX reform: - Domestic constraints (election cycle, capacity) and external risks (DRC border conflict spillovers) could impede FX unification, constraining reserve accumulation and donor re-engagement. - Escalation of external arrears: - Limited data could understate external and domestic arrears. - Recent escalation of the DRC conflict and closure of the land border since December 2025 pose additional risks. - Fiscal execution risks: - The revised FY2025/26 budget includes a sizable, front-loaded adjustment that relies on a large projected increase in non-tax revenues, full implementation of planned tax and PFM measures, and across-the-board spending compression. - Limited implementation capacity increases execution risks. - DRC conflict and Ebola spillovers: - About 100,000 Congolese refugees entered Burundi at end-2025 amid security concerns. - Potential Ebola outbreak in DRC could exacerbate pressures and make sustaining spending restraint difficult. ### Upside risks (enumerated) - Continued improvements in terms of trade. - Swifter and successful FX reforms: - Reduction of the FX premium and rapid exchange rate unification would address macro imbalances, improve fuel supply, strengthen investor confidence, and boost formal exports. - A new Fund-supported arrangement: - Could catalyze donor support and capital inflows. - Stabilization of the conflict in eastern DRC: - Reopening of the land border and conflict resolution would alleviate pressures and create a conducive environment for economic development. - Potential delayed World Bank funding release. ### Authorities’ views and policy actions - Authorities broadly agreed with the DSA conclusions and emphasize the National Stabilization Strategy (2025–27) as the comprehensive policy framework (fiscal consolidation, cessation of monetary financing, progressive FX reform). - Key actions and commitments described by the authorities: - SOE borrowing and dividend decisions now require Ministry of Finance validation; regular monitoring meetings with SOEs established. - FY2025/26 budget law prohibits ministries from incurring extra-budgetary commitments; commitment cutoff dates enforced to prevent new arrears accumulation. - Continued efforts to address external arrears and debt vulnerabilities. - Fiscal policy and revenue mobilization: - Fiscal consolidation shifting from commitment to implementation; domestic revenue mobilization central to reforms. - Adoption of e‑KORI; taxpayer registration reached around 40 percent of the end‑period target; electronic billing performance exceeds 50 percent of the target. - Establishing a comprehensive digital registry of tax exemptions; high-level committee conducting a diagnostic review with a first draft expected by end‑June 2026. - Debt management and PFM reforms: - Revised legal framework in place for debt management; technical and steering committees reactivated. - Treasury Committee operational; Treasury Single Account roadmap being implemented. - Prime Ministerial decree (February 2026) established a high-level steering framework supported by technical committees for expenditure commitments, treasury management, public debt management, and treasury securities. - Decree reorganizing the Cour des Comptes and reinforcing its oversight and audit functions adopted. - Monetary and financial sector policies: - Monetary policy calibrated to bring inflation toward the East African Community (EAC) target of 8 percent. - Inflation decline: from about 45 percent in April 2025 to 8.6 percent in April 2026. - Central Bank (BRB) plans improved liquidity management and expected introduction of the interest rate corridor. - Commitment to a prudent, gradual, and well-sequenced dual exchange rate reform path. - AML/CFT reforms progressing; first evaluation underway with report expected in September 2026; beneficial ownership registry steering committee in place. - Structural and sectoral reforms: - Priority reforms in energy, agriculture, and mining to address growth bottlenecks. - Efforts to scale up electricity generation, strengthen competition in the fuel sector, diversify trade partners, and engage development partners (World Bank, AfDB). - Mining governance improvements producing production growth and reduced informality. - Agricultural reforms to improve fertilizer availability and oversight of agricultural exports. - SOE governance reforms and Governance Diagnostic Assessment in discussion. - Measures to ease financial and business constraints: SME guarantee mechanism, Special Economic Zones, digital one-stop shop. ### Key statistics and debt composition (as reported) - Debt stock (end of period, In US$ Million): - Total: 2818.1 - External: 727.6 - Domestic: 2090.6 - T-Bills: 325.8 - Bonds: 691.5 - Loans: 1073.3 - Nominal GDP: 6767.11 - PV of baseline external debt-to-exports: - 99 percent in 2025; 90 percent in 2026; 79 percent in 2027. - PV of total public debt-to-GDP: - 39 percent in 2025; 37 percent in 2026–27; below 35 percent from 2029. - Thresholds and stress-test markers: - External PV-to-exports threshold: 140 percent. - External debt service-to-exports threshold: 10 percent. - Customized scenario peak PV-to-exports: 180 percent in 2026–28. - Refugee inflow: about 100,000 Congolese refugees entered Burundi at end-2025. - Inflation: - About 45 percent in April 2025; 8.6 percent in April 2026. - Growth projection noted by staff: 3.9 percent for 2026 (authorities viewed outlook as more favorable). *Source: Excerpt from IMF country materials on Burundi (2026), as provided in the content unit.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1bdiea2026001.pdf_