Business Insider Edition
According to the International Monetary Fund (IMF), growth-focused budget consolidation initiatives would aid Burundi in overcoming the current economic challenges that are delaying the country's recovery from the recession brought on by recent global shocks.
The budget deficit of Bujumbura (one of Burundi’s economic hubs), is anticipated to be reduced due to sustained attempts to cut current spending, which wages and subsidies have mostly driven up. This year's economic growth is also anticipated to be higher thanks to improved tax collection.
The IMF noted in a statement following an assessment of Burundi's performance under the 38-month $271 million Extended Credit Facility (ECF) agreement accepted in July that the country will see faster development despite several obstacles thanks to other macroeconomic reforms and regulated fiscal spending.
“Economic growth is expected to slightly accelerate in 2023, driven by the secondary and tertiary sectors, as the Burundian economy continues to recover,” said IMF’s Burundi Mission Chief Mame Astou Diouf.
The cost of living in Burundi continues to be relatively high in comparison to most economies across the world, which have begun to recover from the shocks caused by the Ukraine conflict and pandemic crises. A number of obstacles is now hampering Burundi's economic recovery.
According to the global lender, delayed rainfall near the end of last year increased food inflation in the nation, which has since been made worse by structural supply chain problems brought on by fuel shortages this year and a lack of available foreign currency.
The country's overall inflation rate has also been high, averaging 29 percent in the eight months leading up to August 2023 and being mostly driven by rising food costs and a weaker currency.
The amount of foreign currency reserves has also decreased; at $59.7 million in mid-September, they were only sufficient to cover imports for one month, down from 1.5 months in mid-March of this year.
The IMF also noted that Bujumbura's current account deficit, which is presently projected to be 15.6 percent of GDP, has continued to be significant due mostly to high import costs and sluggish gold sales.
Reforms to lower government expenditure and boost income, together with the Bank of the Republic of Burundi's (BRB) suggested monetary tightening under the ECF facility, are anticipated to cut inflation and boost economic activity.
“Governance and structural reforms will ensure a business environment conducive to private sector-led, job-rich, and inclusive growth,” Ms Diouf said in a statement after meeting with Burundian officials.
More than double the 1.8% growth rate seen last year, Burundi's economy is projected to increase by 4.5% this year, while fiscal consolidation efforts are anticipated to reduce the budget deficit by half, to 6.1% of GDP.
According to the IMF, the $62 million initial transfer made in July under the new ECF arrangement, together with strong remittances, will bolster the predicted growth by preserving the country's decreasing foreign exchange reserves.
