This 2012 Article IV Consultation highlights that despite a difficult economic and social context, Burundi has made steady, though uneven, progress in implementing its Extended Credit Facility (ECF)-supported economic reforms. Real GDP growth is estimated to have increased to 4.2 percent in 2011. The medium-term macroeconomic outlook is challenging. Risks emanate from a delicate social situation given persistent shocks and the high cost of living. Executive Directors have emphasized the importance of pursuing public financial management reforms to foster greater transparency and accountability, and to strengthen institutional capacity.

Abstract

This 2012 Article IV Consultation highlights that despite a difficult economic and social context, Burundi has made steady, though uneven, progress in implementing its Extended Credit Facility (ECF)-supported economic reforms. Real GDP growth is estimated to have increased to 4.2 percent in 2011. The medium-term macroeconomic outlook is challenging. Risks emanate from a delicate social situation given persistent shocks and the high cost of living. Executive Directors have emphasized the importance of pursuing public financial management reforms to foster greater transparency and accountability, and to strengthen institutional capacity.

The Executive Board of the International Monetary Fund (IMF) today completed the first review of Burundi’s performance under the program supported by the Extended Credit Facility (ECF). In completing the review, the Executive Board approved a modification of performance criteria for end-September 2012.

The Executive Board’s decision will allow for the disbursement of an amount equivalent to SDR 4 million (about US$ 6 million), bringing disbursements under the arrangement to an amount equivalent to SDR 5 million (about US$ 7.6 million). Burundi’s current three-year ECF arrangement was approved on January 27, 2012 (See Press Release No. 12/35)

Following the Executive Board’s decision on Burundi, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, issued the following statement:

“Progress under the Fund-supported program has continued at an uneven pace. Economic growth is expected to exceed 4 percent in 2012, but inflation has been persistent in the wake of the food and fuel price shocks. The medium-term economic outlook remains challenging and vulnerable to downside risks stemming from internal strains, declining donor support, and the external environment.

“Fiscal slippages in early 2012 were addressed decisively in a supplementary budget through a combination of revenue and expenditure measures. To ensure that the budget targets are achieved, further revenue mobilization, including through improvements in tax administration, remains important.

“Underlying inflation has started to decline, but monetary policy should stay focused on anchoring inflation expectations. Higher policy rates have contributed to a welcome slowdown in credit expansion, but further action will be necessary if inflationary pressures do not ease in the period ahead.

“Maintaining debt sustainability remains a priority for fiscal policy. Given Burundi’s vulnerability to debt distress, financing should continue to rely primarily on highly concessional resources. Equally important, further steps are needed to strengthen public debt management, including the finalization of a medium-term debt management strategy currently under preparation.

“Burundi’s competitiveness needs to be enhanced to boost growth prospects and accelerate economic development. To this end, it is important to push ahead with structural reforms to improve the business environment, including by strengthening infrastructure and energy supply,” Mr. Shinohara added.

Burundi: 2012 Article IV Consultation and First Review Under the Three-Year Arrangement Under the Extended Credit Facility and Request for Modification of Performance Criteria: Staff Report; Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for Burundi
Author: International Monetary Fund