IMF Executive Board Concludes 2022 Article IV Consultation with Burundi
IMF News, July 21, 2022
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- Published: July 21, 2022
Overview
- Executive Board concluded the 2022 Article IV consultation with Burundi on July 20, 2022.
- Burundi continues to face headwinds from the COVID-19 pandemic and the impact of the war in Ukraine, including higher import prices (food and fuel), lower export prices (tea and coffee), and supply chain bottlenecks.
- The country is benefiting from reengagement with the international community, lifting of E.U. and U.S. sanctions at end 2021/early 2022, and ending of mandatory reporting by the U.N. Security Council.
- The 2022 Article IV Consultation seals the full reengagement with the IMF—the last Consultation was concluded in 2014.
- It is expected that the next Article IV consultation with Burundi will be held on the standard 12-month cycle.
Outlook and Projections
- Growth:
- Growth is expected to pick up to 3.3 percent in 2022, strengthening slightly from 3.1 percent in 2021.
- Average growth projected about 4.7 percent over 2023-27.
- Inflation:
- Inflation is expected to rise to double digits in 2022, and subsequently subside.
- Fiscal:
- The fiscal deficit would level off at around 5 percent of GDP in 2021/22, lower than during the peak of the pandemic (7.8 percent of GDP in 2020/21).
- External and debt:
- Burundi’s public debt is sustainable; however, the risk of external debt distress is high.
- External imbalances are large, with reserve coverage below adequacy levels and a large parallel exchange rate market premium.
- Notable risks:
- Downside risks: uncertainty around the duration and impact of the pandemic and spillovers from the war in Ukraine.
- Upside risks: recent announcement of grants to help Burundi cope with external shocks, full potential of reengagement with the international community, and end of mining contract negotiations.
Executive Board Assessment
- Directors agreed with the thrust of the staff appraisal and welcomed authorities’ policy response to COVID-19 and steps to address spillovers from the war in Ukraine, including inflationary pressures.
- Key Director emphases:
- Need for an ambitious and broad-based set of policies to address debt vulnerabilities and external imbalances.
- Reforms to address roots of fragility, unlock bottlenecks, and ensure inclusive growth.
- Importance of durable political and social stability and welcome for authorities’ reengagement with the international community.
- Fiscal stance:
- Welcomed Burundi’s commitment to revenue-led fiscal consolidation and prudent borrowing.
- Noted debt remains sustainable but the risk of external debt distress is high.
- Underscored the need to enhance domestic revenue mobilization through digitalization and measures to widen the tax base.
- Welcomed focus on protecting priority COVID-19-related investment and social spending, including on health and education.
- Emphasized rationalizing spending and strengthening public financial management.
- External and monetary policy:
- Highlighted weak external position and need to rebuild reserves; saw merit in using the SDR allocation primarily to bolster reserves.
- Underlined importance of modernizing the monetary policy framework and welcomed authorities’ commitment to design a reform strategy to unify the official and parallel market exchange rates, supported by Fund capacity development.
- With ongoing inflationary pressures and rapid credit growth, underscored need for well-timed recalibration of the monetary policy stance, steps to reduce monetary financing, and strengthen central bank independence.
- Recommended vigilance to financial sector risks and adjusting policy as needed.
- Governance, fragility, and AML/CFT:
- Called for reforms to address fragility, enhance competitiveness, and strengthen governance.
- Emphasized measures to improve human capital, enhance productivity, and reduce vulnerability to climate-related shocks.
- Encouraged transparency on COVID-19-related spending and collecting/publishing information on ultimate beneficial ownership of companies awarded COVID-related contracts.
- Called for steps to align the AML/CFT framework with international standards and quick implementation of requirements to gain full membership in the Eastern and Southern Africa Anti-Money Laundering Group.
Key Statistics and Selected Indicators (from Table 1)
- Real GDP (annual percentage change):
- 2019: 1.8
- 2020: 2.1
- 2021: 0.3
- 2022 (proj.): 3.1
- 2023 (proj.): 3.3
- 2024: 4.1
- 2025: 4.9
- 2026: 5.1
- 2027: 4.8
- CPI (period average):
- 2019: -0.7
- 2020: 5.6
- 2021: 7.3
- 2022 (proj.): 5.2
- 2023: 8.3
- 2024: 11.0
- 2025: 8.0
- 2026: 4.3
- 2027: 4.0
- Broad Money (M2) growth rates (selected):
- 2019: 23.9
- 2020: 20.9
- 2021: 25.4
- 2022 (proj.): 19.8
- 2023: 22.3
- 2024: 18.2
- Credit to non-government sector (note: 15 percent statistical adjustment applied in 2021):
- 2019: 17.7
- 2020: 7.8
- 2021: 15.5
- 2022 (proj.): 44.8
- 2023: 20.6
- M2/GDP (percent):
- 2019: 36.2
- 2020: 37.4
- 2021: 42.7
- 2022 (proj.): 41.4
- 2023: 46.7
- 2024: 49.2
- 2027: 59.3
- Central government budget (percent of GDP, selected):
- Revenue and grants:
- 2019: 20.4
- 2020: 21.8
- 2021: 22.2
- 2022 (FY, proj.): 22.0
- 2023: 23.2
- 2024: 23.8
- Grants (of which):
- 2019: 4.5
- 2020: 4.7
- 2021: 5.0
- 2022 (FY, proj.): 9.8
- Expenditure:
- 2019: 26.5
- 2020: 28.3
- 2021: 28.2
- 2022 (FY, proj.): 27.9
- Overall balance:
- 2019: -6.2
- 2020: -6.5
- 2021: -6.0
- 2022 (FY, proj.): -5.8
- 2023: -7.8
- 2025: -3.7
- Public gross nominal debt (percent of GDP):
- 2019: 60.0
- 2020: 59.7
- 2021: 66.0
- 2022 (proj.): 61.5
- 2023: 66.6
- 2024: 66.9
- 2027: 54.8
- External sector (percent of GDP, selected):
- Trade Balance (goods and services):
- 2019: -23.8
- 2020: -25.7
- 2021: -24.3
- 2022 (proj.): -25.3
- 2023: -28.0
- 2027: -21.9
- Current account balance (incl. budget support):
- 2019: -11.6
- 2020: -16.9
- 2021: -16.4
- 2022 (proj.): -13.4
- 2027: -10.4
- Gross international reserves:
- In millions of US$: 2019: 113.4; 2020: 94.3; 2021: 266.6; 2022 (proj.): 263.3; 2027: 222.3
- In months of next year imports: 2.2 (2019); 1.9 (2020)
- GDP at current market prices:
- In billions of Burundi Francs: 2019: 5,560; 2020: 6,191; 2021: 5,911; 2022: 6,657; 2027: 12,868
- In billions of US$: 2019: 3.0; 2020: 3.2; 2021: 3.4; 2022: 3.6
- GDP per capita (Nominal US$):
- 2019: 261.3
- 2020: 273.0
- 2021: 259.9
- 2022 (proj.): 275.8
- 2027: 373.6
- Population (million):
- 2019: 11.5
- 2020: 12.2
- 2021: 13.4
- 2022 (proj.): 14.2
Policy Recommendations and Priorities
- Enhance domestic revenue mobilization through digitalization and measures to widen the tax base.
- Continue revenue-led fiscal consolidation and prudent borrowing; protect priority COVID-19-related investment and social spending (health and education).
- Rationalize spending and strengthen public financial management.
- Use SDR allocation primarily to bolster reserves.
- Modernize the monetary policy framework and design a strategy to unify official and parallel market exchange rates, supported by Fund capacity development.
- Recalibrate monetary policy stance as needed, reduce monetary financing, and strengthen central bank independence.
- Remain vigilant to financial sector risks and adjust policy as needed.
- Implement reforms to address fragility, enhance competitiveness, improve human capital, and reduce vulnerability to climate-related shocks.
- Ensure transparency of COVID-19-related spending and publish information on ultimate beneficial ownership of companies awarded COVID-related contracts.
- Align the AML/CFT framework with international standards and implement requirements for full membership in the Eastern and Southern Africa Anti-Money Laundering Group.
IMF Communications Department, Press Release No. 22/275 (July 21, 2022).