IMF Staff Concludes Visit to Burundi
IMF News, October 5, 2023
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- Published: October 5, 2023
Mission and context
- IMF team led by Ms. Mame Astou Diouf, Mission Chief for Burundi, visited Bujumbura during September 25−29, 2023 and held follow-up discussions during October 2−4, 2023.
- On July 17, 2023, the Executive Board approved a 38-month arrangement under the Extended Credit Facility (ECF) with access of SDR 200.2 million (or about US$ 261.7 million, representing 130 percent of quota).
- End-of-Mission press release conveys preliminary findings of IMF staff and does not necessarily represent the views of the IMF’s Executive Board.
Recent developments and macroeconomic outlook
- Economic growth
- Economic growth is expected to slightly accelerate in 2023 (from 1.8 percent in 2022), driven by the secondary and tertiary sectors.
- Agriculture, supply, and fuel
- Rain delays and structural challenges at the end of 2022 impacted the first agricultural season of 2023.
- Commerce and in-country distribution of agricultural products were disrupted by domestic fuel shortages, compounded by limited foreign exchange availability, high fuel import prices, and supply chain issues.
- Increases of pump prices in July and September and higher fuel import volume helped reach cost-recovery pricing and tame shortages.
- Inflation
- Average inflation stood at around 29 percent during January−August 2023, driven mainly by food prices, despite easing somewhat during March−July.
- Beneficial effects of the new agricultural harvest on food prices were outweighed by high import prices owing to the war in Ukraine and domestic factors.
- External sector and reserves
- External sustainability remains a pressing challenge.
- The current account deficit is projected to remain large (15.6 percent of GDP in 2022).
- Foreign currency reserves declined to US$ 59.7 million (about 0.5 month of imports) in mid-September (from 1.3 months of imports at end-March 2023), driven by the import bill and delayed gold sales.
- Strong remittance inflows and the IMF’s first ECF disbursement provided a cushion.
- Exchange rate developments
- The central bank operated a 38-percent nominal ER depreciation on May 4, 2023, which temporarily reduced the parallel ER market premium.
- The parallel ER market premium widened from about 42 percent on May 4 to about 57.4 percent in end-September.
- Financial sector
- The financial sector shows resilience.
Reform program objectives and policy directions
- Program aims
- Support economic recovery from shocks.
- Restore external sustainability.
- Strengthen debt sustainability.
- Create fiscal space for accelerated and inclusive growth.
- Fiscal policy
- Resuming pro-growth fiscal consolidation to support debt sustainability while protecting the vulnerable population.
- The fiscal deficit is estimated to have widened substantially in FY2022/23 (June−July) compared to FY2021/22 (7 percent of GDP), driven mainly by salaries, subsidies, and accelerated investment scaling up.
- A return to fiscal consolidation is planned under the program starting in FY2023/24, building on strengthened revenue collection efforts and current spending restraint while preserving social spending and efficient public investment.
- Public debt is expected to decline over the medium term.
- Monetary and external policy recalibration
- The Bank of the Republic of Burundi (BRB) is committed to recalibrating monetary and external policies to rebuild FX reserve buffers and improve ER market efficiency.
- Essential components include FX market liberalization, tightened monetary policy, and limited financing to the budget.
- These measures aim to curb inflation pressures.
- Governance and structural reforms
- Governance and structural reforms are intended to ensure a business environment conducive to private sector-led, job-rich, and inclusive growth.
- Financial sector vulnerability consideration
- Growth- and governance-enhancing reforms should be undertaken while being attuned to financial sector vulnerabilities.
Engagement and next steps
- The IMF remains committed to supporting Burundian authorities to reduce external imbalances, rein in inflation, preserve debt sustainability, and foster governance and sustainable and inclusive growth.
- Mission meetings included H.E. Prime Minister Gervais Ndirakobuca; H.E. Audace Niyonzima, Minister of Finance, Budget and Economic Planning (MFBPE); Mr. Dieudonné Murengerantwari, Governor of the Bank of the Republic of Burundi (BRB); Ms. Francine Inarukundo, Permanent Secretary of the MFBPE; other government and BRB officials; commercial banks; private sector; civil society; and donors.
- The mission expressed thanks to the Burundian authorities for hospitality, cooperation, and open and productive discussions.
IMF Press Release No. 23/337 — IMF Communications Department