IMF Staff Completes 2025 Article IV Mission to Burundi
IMF News, April 15, 2025
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Bibliographic details
- Published: April 15, 2025
Mission overview
- IMF team led by Alexandre Chailloux visited Burundi on March 17-28 for the 2025 Article IV annual consultation.
- Press release date: April 15, 2025.
- Discussions focused on policies to ensure macroeconomic stability, and the structural reform agenda needed to durably buttress growth, entrench debt sustainability, strengthen financial sector stability, reduce poverty and reinforce resilience to climate-related risks.
- End-of-mission statement conveys preliminary staff findings; a staff report will be prepared for the IMF’s Executive Board subject to management approval.
Macroeconomic outlook and risks
Findings:
- GDP growth reached 3.5 percent in 2024, against 3.3 percent in 2023.
- Growth is expected to decline in 2025 but will recover gradually in the medium term.
- Inflation had briefly eased below 15 percent in the first half of 2024 but rebounded and reached 39 percent on average over the first two months of 2025, amid rapid money supply growth.
- Continued reliance on monetary financing is expected to sustain high inflationary pressures well into 2027.
- Current account deficit improved in 2024 and would continue to improve in 2025, driven mainly by lower imports amid import compression.
- Key exports declined notably due to increased under-invoicing of agricultural exports; medium-term prospects: higher global coffee and gold prices, resumption of mining extraction and signing of new contracts could raise export revenues and foreign exchange reserves.
- Exchange rate premium more than doubled in 2024 but has stabilized earlier in 2025.
- Public debt stock stood at about 52 percent of GDP at end 2024; assessed as sustainable but with high risk of debt distress, conditional on the authorities pursuing exchange rate and other reforms.
- By 2030, the ratio of total public debt is projected to decline, driven mainly by ample negative real interest rates on domestic debt.
Risks:
- Waning reform momentum in 2024, slower global growth, reductions in official development aid flows, and resurgence of trade barriers could worsen the outlook.
- Limited foreign reserves leading to fuel restrictions and import compression constrain growth in 2025.
Fiscal policy
Findings:
- Domestic revenues are declining in real terms.
- In the absence of donor budget support, further monetary accommodation of budget deficits risks putting inflation on a spiraling trajectory.
- Real spending cuts would disproportionately hurt the most vulnerable.
Recommendations and priorities:
- Strengthen domestic revenue mobilization:
- Continue digitalization of tax declaration and payments, and deployment of electronic billing machines.
- Prepare a taxpayers’ register.
- Conduct an annual review of tax exemptions.
- Improve transparency in collection of non-tax revenues by line ministries and agencies other than the revenue agency.
- Review tax policy to reduce disproportionate impact on the most vulnerable from VAT and excise taxes; transition toward a more progressive and growth friendly tax framework, supported by Fund technical assistance.
- Continue public financial management (PFM) reforms:
- Payment decentralization and transition to multi-year program budgeting are underway.
- Reinforce internal and external audits and improve public investment management.
- Entrenching public debt sustainability requires: foreign exchange market liberalization, fiscal consolidation, monetary tightening, cautious debt management, and prioritizing grant financing.
Foreign exchange and monetary policy
Findings:
- Ongoing monetary financing is a major driver of inflation and parallel FX rate depreciation.
- Underdeveloped financial markets and low access to credit hinder transmission of interest rate–based policy.
- Current dual exchange rate regime and high FX premium cause pervasive distortions.
Recommendations:
- Modernize monetary policy framework:
- Strengthen transitional flexible monetary targeting while working towards inflation targeting.
- Continue prioritizing M2 as an intermediate target and ensure clearer communication of the 8 percent inflation target.
- Introduce a new interbank trading platform to improve operational effectiveness of the policy rate.
- Urgent quantitative tightening and safeguard the BRB’s independence to limit fiscal dominance:
- Bring the growth rate of the monetary base below 20 percent.
- Enforce the cap on government advances.
- Staff strongly recommended that the BRB increases its policy rate, currently set at 12 percent.
- Unify and liberalize the foreign exchange market:
- Move toward a unified and market-clearing exchange rate and a more flexible exchange rate regime, alongside supportive fiscal and monetary policies and structural reforms.
Financial sector policies
Findings:
- Core equity ratio: 17.1 percent in December 2024.
- Liquid assets represented 19 percent of loans.
- Liquid assets to total risk-weighted assets: 15.4 percent.
- Credit growth: 27.2 percent.
- Nonperforming loans (NPLs) rose to 3.8 percent in 2024 from 2.7 percent in 2023.
Recommendations:
- Conduct an asset quality review (AQR) to assess banks’ loan portfolios, then evaluate capital adequacy ratios.
- Direct banks to invest in staff capacity building for better credit risk assessment.
- Implement a robust framework to monitor banks' exposure to government debt, including stress testing for sovereign risk and considering bank-specific capital charges in case of elevated sovereign risk exposure.
- Modernize payment systems and expand digitization (mobile payment, QR codes, interoperable payment platforms) to reduce cash use, deepen the financial system, strengthen monetary policy transmission, improve tax compliance, and accelerate social transfer disbursement and targeting.
Structural policies
Findings and priorities:
- Accelerate implementation of structural reforms to address governance gaps, enhance rule of law, and remove long-standing bottlenecks to productivity.
- Strengthen state-owned enterprise performance, modernize the coffee sector, and improve trade-related infrastructure to unlock growth potential.
- Authorities aim to focus on import substitution programs (particularly in the food sector) and increase agricultural exports like coffee, tea, avocados and minerals.
Coffee sector specifics:
- Authorities are selling Burundian coffee at higher prices and working to close the gap with global coffee prices.
- Constraints: outdated farming practices, limited access to finance and inputs, underinvestment in processing, and the exchange premium that disincentivizes farmers by converting export proceeds at the official rate, encouraging smuggling and transfer pricing.
- Recommended actions: strengthen cooperatives, improve infrastructure, promote value addition, ensure a stable regulatory environment and larger passthrough of international prices to small coffee growers.
Mining sector specifics:
- Earlier contracts did not yield large export revenues; authorities have broken non-performing contracts and seek up-front mining payments rather than waiting for extraction and processing.
- Improving governance and transparency in the sector, notably by joining the EITI, would be critical to fulfill the sector’s potential.
Key statistics and indicators (preserved exactly)
- Mission dates: March 17-28.
- Press release date: April 15, 2025.
- GDP growth: 3.5 percent in 2024; 3.3 percent in 2023.
- Inflation: briefly eased below 15 percent in the first half of 2024; reached 39 percent on average over the first two months of 2025.
- Inflation target to be communicated: 8 percent.
- Policy rate: currently set at 12 percent.
- Monetary base growth target: bring below 20 percent.
- Public debt stock: about 52 percent of GDP at end 2024.
- Core equity ratio: 17.1 percent in December 2024.
- Liquid assets represented 19 percent of loans.
- Liquid assets to total risk-weighted assets: 15.4 percent.
- Credit growth: 27.2 percent.
- Nonperforming loans (NPLs): 3.8 percent in 2024 from 2.7 percent in 2023.
- Public debt ratio projection: decline by 2030 (driven mainly by ample negative real interest rates on domestic debt).
Final staff note
- “Controlling inflation should be the authorities’ utmost priority, given its impact on the poor and the widespread economic distortions it causes.”
- The IMF mission team thanks the Burundian authorities and all other interlocutors for the candid discussions and their hospitality.
IMF Staff Completes 2025 Article IV Mission to Burundi — Press Release No. 25/105