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Article

Burundi: Selected Issues and Statistical Appendix

Author(s):
International Monetary Fund
Published Date:
August 2006
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I. Introduction

The selected issues paper has three chapters:

  • Chapter II analyzes Burundi’s economic performance in the light of the past decade of delayed structural reform and future challenges. The analysis shows a sharp degradation of the economy. Burundi is not only poorer but also more vulnerable, due to a low level of investment, weak business climate, and low productivity in the agricultural sector. The new authorities have a window of opportunity to gather a broad political and social consensus on reforms, in order to develop and implement an ambitious structural agenda geared toward a private-sector-led growth. Such an agenda would require not only prudent macroeconomic policies and further liberalization of the economy, but also an emphasis on good governance, transparency, and efforts to durably improve investor confidence.
  • Chapter III examines the short and long-run determinants of economic growth in Burundi during the period of 1965–2005. Specific attention is given to explaining the extent to which structural rigidities and macro stability affects growth and the speed of adjustment toward a long-term growth path. The determinants of output fluctuations and growth are examined both on the supply side and the demand side. On the supply side, the paper employs the growth accounting exercise, controlling for possible endogeneity problems of production factors. On the demand side, the same methodology allows evaluation of the speed at which output adjusts toward long-run equilibrium in the baseline. The chapter concludes that macroeconomic stability and the implementation of key structural reforms will be essential for long-run growth.
  • Chapter IV stresses the importance of fiscal policy for macroeconomic stability and the critical role of Public Expenditure Management (PEM) in fiscal policy. The chapter takes stock of current fiscal management of public expenditures and identifies weaknesses and needs for further reforms. It concludes that it is urgent that Burundi consolidate its current PEM reforms and move forward purposefully to bring fiscal management to regional and international standards.

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