IMF Staff Completes 2022 Article IV Consultation Mission to Burundi

IMF News, March 17, 2022

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Real GDP growth increased to 2.4 percent in 2021, driven by a recovery in primary and tertiary sector activities as social distancing measures and travel restrictions eased.
Agricultural production was supported by improvements in input provision, including timely availability of fertilizers and better-quality crops.
The secondary sector experienced weaker growth than in 2020 because of a slowdown in mining activities due to contract renegotiations.
GDP growth is projected at 3.6 percent in 2022, driven by all sectors, although slowed down by the war in Ukraine.
Over the medium term, GDP growth is expected to increase as the effects of COVID-19 wane and ongoing investment projects and reforms start delivering the expected impact.
Projections carry upside potential from the government’s ongoing initiatives and reforms and potentially larger foreign financing from reengagement with the international community, and downside risks from the geopolitical situation in Europe, the end of the pandemic, and risks of natural disasters in Burundi.

Inflation increased to 8.3 percent in 2021 (compared to 7.5 percent in 2020), driven by higher food prices.
Inflation could accelerate to 9.2 percent in 2022, driven by rising commodity prices including oil prices, triggered by the crisis in Europe.
Imported inflation could be lower than projected if 2022 agricultural crops are abundant (reducing food prices), if regulation of strategic product prices has stronger effects, and if ongoing import substitution initiatives succeed.

The fiscal deficit is projected at 4.6 percent in 2021/22 (from 7.9 percent in 2020/21), driven by an improvement in revenue collection, an increase in grants (partly owing to COVID-19 vaccine grants), and a decrease in current spending.
Public investment is expected to pick up, marking a recovery after a slowdown due to the pandemic.
The fiscal deficit is expected to widen in 2022/23, driven by a further increase in public investment that offsets the expected rebound in revenue and grants.
Revenue collection would continue to strengthen, boosted by the effects of recent revenue measures, while spending would remain contained.

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

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

A team from the IMF led by Ms. Mame Astou Diouf, Mission Chief for Burundi, conducted virtual discussions from February 24 to March 16, 2022 for the 2022 Article IV Consultation.
At the end of the mission Ms. Diouf issued the mission statement conveying IMF staff’s preliminary findings; staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.
The mission met with H.E. Dr. Domitien Ndihokubwayo, Minister of Finance, Budget and Economic Planning (MFBPE); Mr. Jean Ciza, Governor of the Bank of the Republic of Burundi (BRB); Mr. Audace Niyonzima, First Vice-Governor of the BRB; Ms. Christine Niragira, Permanent Secretary of the MFBPE; other officials of the government and the BRB; representatives of commercial banks, non-governmental organizations, and the donor community.
Press officer contact: Eva Graf. Phone: +1 202 623-7100 Email: MEDIA@IMF.org

IMF Staff team statement issued March 17, 2022.