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International Monetary Fund. African Dept.
This paper highlights Burundi’s Request for a 38-Month Arrangement under the Extended Credit Facility (ECF). Burundi faces protracted balance of payments needs with a widening current account deficit and low foreign reserves coverage, large development needs, and macroeconomic challenges triggered by spillovers from the war in Ukraine and domestic climate shocks and livestock sanitary crisis. The 38-month arrangement under the ECF will help cushion Burundi’s adjustment and support the authorities’ reform agenda aimed at reducing debt vulnerabilities, recalibrating exchange rate and monetary policies to restore external sustainability, and strengthening inclusive economic growth and governance. Under the ECF arrangement, the authorities aim to recalibrate Burundi’s macroeconomic policy mix. They plan to restore external sustainability with the unification of the official and parallel exchange rate markets and foreign exchange market liberalization, while being attuned to financial sector vulnerabilities. They will strengthen debt sustainability and achieve a better-quality fiscal consolidation path through higher domestic revenue mobilization, scaled-up investment and better targeted spending, and prudent borrowing.
International Monetary Fund. African Dept.
This 2022 Article IV Consultation discusses that Burundi’s economy continues to navigate the challenging headwinds presented by the coronavirus disease 2019 pandemic and the impact of the war in Ukraine. 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. Growth is expected to strengthen somewhat in 2022, to 3.3 percent, although dampened by inward spillovers of the war in Ukraine, which has compounded nascent domestic fuel shortages and transportation disruptions. Burundi is at high risk of debt distress; and debt is assessed as sustainable contingent on fiscal adjustment and robust export and growth performance. External imbalances have been exacerbated by the pandemic and inward spillovers from the war in Ukraine, with foreign exchange reserves coverage below adequacy levels and a large parallel exchange rate market premium.
International Monetary Fund. African Dept.
This Selected Issues paper on Burundi discusses economic growth, fragility, and non-price competitiveness. In the aftermath of the 2015 crisis that has further fragilized the Burundian economy, the authorities have developed and adopted in 2018 a 10-year National development plan. The origins of Burundi’s fragility are historical, political, and institutional, leading to weak economic performance for the country. More efforts are needed to move the country out of fragility. Focus on investing in the country's long-term peacebuilding would be key. Transparency, social equity, and the fight against corruption are all major actions needed to ensure political stabilization. Also, special attention should be devoted to building a stronger and more resilient economy. Key bottlenecks to Burundi's competitiveness include climate shocks, energy and water constraints, and public management inefficiencies. After several years of instability in Burundi substantive efforts to improve competitiveness have been made.
International Monetary Fund. African Dept.
Burundi is a fragile state with a history of political tensions and weak institutions. Before the Covid-19 pandemic, Burundi was recovering from an economic recession triggered by the 2015 political crisis stemming from the late President Nkurunziza’s decision to run for a third term. Real GDP growth was positive, at 1.8 percent in 2019, but difficult policy challenges persisted.
International Monetary Fund. Office of Budget and Planning
Amidst the unfolding COVID-19 crisis, the Fund faces twin challenges. Signs of early crisis recovery are uneven across countries, and many face daunting crisis legacies. At the same time, longer term challenges from climate change, digitalization and increasing divergence within and between countries demand stepped up effort by the Fund within its areas of expertise and in partnership with others. FY 22-24 budget framework. Considering these challenges and following a decade of flat real budgets, staff will propose a structural augmentation for consideration by fall 2021 to be implemented over two to three years beginning in FY 23. Recognizing the importance of ongoing fiscal prudence, the budget would remain stable thereafter on a real basis at a new, higher level. FY 22 administrative budget. The proposed FY 22 budget sustains crisis response and provides incremental resources for long-term priorities within the flat real budget envelope. The budget is built on extensive reprioritization; savings, including from modernization; and a proposed temporary increase in the carry forward ceiling to address crisis needs during the FY 22 to FY 24 period. Capital budget. Large-scale business modernization programs continue to be rolled out, strengthening the agility and efficiency of the Fund’s operations. In response to the shift towards cloud-based IT solutions, staff propose a change in the budgetary treatment of these expenses. Investment in facilities will focus on timely updates, repairs, and modernization, preparing for the post-crisis Fund where virtual engagement and a new hybrid office environment play a larger role. Budget sustainability. The FY 22–24 medium-term budget framework, including assumptions for a material augmentation, is consistent with a projected surplus in the Fund’s medium-term income position and with continued progress towards the precautionary balance target for coming years. Budget risks. In the midst of a global crisis, risks to the budget remain elevated and above risk acceptance levels, including from uncertainty around the level of demand for Fund programs and ensuing staffing needs, as well as future donor funding for CD. Enterprise risk management continues to be strengthened with this budget.