Burundi: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Burundi

International Monetary Fund. African Dept.

doi:10.5089/9798400219122.002.A001

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International Monetary Fund. African Dept.

International Monetary Fund. African Dept.
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Publication Date:: 29 Jul 2022

eISBN:: 9798400219122

ISBN:: 9798400219122

Language:: English

Keywords:: Burundi's economy; market premium; debt vulnerability; Burundi authorities; import bill; COVID-19; Budget planning and preparation; Global; Southern Africa; East Africa

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1. Burundi is a post-conflict country with deep-rooted fragility (Selected Issues Paper, SIP). The country fell into a political and security crisis following late President Nkurunziza’s decision to run for a third term in 2015. Multidimensional fragility persists, with low capacity, sporadic violence, weak judicial and governance systems, high poverty and inequality, and vulnerability to natural disasters. Burundi’s 2018–27 development plan (Plan National de Dẻveloppement, PND), aims to address key weaknesses through export diversification, infrastructure development, improved access to social safety nets and public services, and better governance. President Ndayishimiye, representing the incumbent ruling party, won the May 2020 elections, succeeding Mr. Nkurunziza who passed away in June 2020, and took steps to reengage with the international community. Amid significant security improvements, the U.N. Security Council ended mandatory reporting on Burundi in 2020, the U.S. lifted in November 2021 the sanctions it imposed in 2015, and the E.U. removed sanctions under Article 96 of the EU-ACP partnership agreement in February 2022.

Abstract

Context

1. Burundi is a post-conflict country with deep-rooted fragility (Selected Issues Paper, SIP). The country fell into a political and security crisis following late President Nkurunziza’s decision to run for a third term in 2015. Multidimensional fragility persists, with low capacity, sporadic violence, weak judicial and governance systems, high poverty and inequality, and vulnerability to natural disasters. Burundi’s 2018–27 development plan (Plan National de Dẻveloppement, PND), aims to address key weaknesses through export diversification, infrastructure development, improved access to social safety nets and public services, and better governance. President Ndayishimiye, representing the incumbent ruling party, won the May 2020 elections, succeeding Mr. Nkurunziza who passed away in June 2020, and took steps to reengage with the international community. Amid significant security improvements, the U.N. Security Council ended mandatory reporting on Burundi in 2020, the U.S. lifted in November 2021 the sanctions it imposed in 2015, and the E.U. removed sanctions under Article 96 of the EU-ACP partnership agreement in February 2022.

2. Burundi’s economy had been resilient prior to the COVID-19 pandemic (Figures 1–6). Growth recovered to 1.8 percent in 2019 and inflation averaged -0.7 percent owing to abundant crop (SIP). The current account (CA) deficit was stable, at 11.6 percent of GDP, supported by gold exports, remittances, and official transfers. The fiscal deficit remained large, at 6.2 percent of GDP in 2018/19, although revenue collection had been robust. Foreign exchange (FX) reserves were anemic (1.3 months of imports at end-2019) and a large parallel exchange rate (ER) market premium persisted (SIP).

3. The economic recovery was disrupted by the pandemic, while spillovers from the war in Ukraine pose headwinds to growth. The authorities prepared a response plan to limit the COVID-19 spread and cushion its macroeconomic and social impact (Annex I). The plan, which was costed at US$150 million, included a sanitary plan of US$ 58 million (1.8 percent of GDP) and infrastructure investment to improve public health capacity and access. The pandemic led to a slowdown in growth to 0.3 percent in 2020, despite subdued contagion (0.3 percent of the population as of June 7, 2022), including during the Omicron wave. Vaccination started in October 2021 but remains limited (less than one percent of the population). The war in Ukraine is expected to further weigh on the recovery.

4. The 2022 Article IV Consultation seals Burundi’s full reengagement with the Fund since the last Article IV in 2014. Burundi benefited from five tranches of debt relief under the Catastrophe Containment and Relief Trust (CCRT, SDR 17.96 million) starting in 2020, the general SDR allocation of August 2021 (SDR 147.6 million or 6.3 percent of GDP), and a disbursement under the Rapid Credit Facility (RCF, SDR 53.9 million or 2.3 percent of GDP) in October 2021.

Recent Macroeconomic Developments

5. Inward spillovers from the war in Ukraine are sizeable, with a commensurate government response (Text Table 1). Disruptions to supply chains, including to Ukraine’s ability to exports, sanctions against Russia and Belarus, and the hoarding behavior of major food producers deteriorated Burundi’s terms of trade. Food and fuel imports prices soared, increasing Burundi’s import bill, and compounding the effects of pre-existing FX shortages, which increased domestic fuel rationing and transportation disruptions.^¹ Moreover, while Japan and Russia announced donations in-kind to help stem import pressures, they have not materialized yet. Export prices dropped, including tea prices (-12 percent in 2022) and coffee prices somewhat (-1 percent), reducing Burundi’s export proceeds. Gold prices have increased, though slightly (+1.1 percent in 2022), cushioning the terms of trade deterioration. The spillovers will be long-lived as prices are not expected to return to pre-war projections in the medium term.

^{Text Table 1.}

Burundi: Mitigating Measures

^{Text Table 1.}

Burundi: Mitigating Measures

Measures	Date
Fuel prices were raised twice in Z0ZZQ1. The second raise was from BIF 2700 to 3250 per liter.	23-Apr-22
Public transportation prices were increased. E.g., bus tickets in Bujumbura went from BIF450to 550.	3-May-22
Expected grants	Date
Grant by Japan worth USS 3,45 million	24-Mar-22
Grants by Russia, including fuel, fertilizer, and medicines	9-May-22

^{Text Table 1.}

Burundi: Mitigating Measures

Measures	Date
Fuel prices were raised twice in Z0ZZQ1. The second raise was from BIF 2700 to 3250 per liter.	23-Apr-22
Public transportation prices were increased. E.g., bus tickets in Bujumbura went from BIF450to 550.	3-May-22
Expected grants	Date
Grant by Japan worth USS 3,45 million	24-Mar-22
Grants by Russia, including fuel, fertilizer, and medicines	9-May-22

6. Burundi’s economy is recovering although it grapples with a weak external position.

Growth and Inflation. Output growth is estimated to have rebounded to 3.1 percent in 2021 mainly driven by a recovery in services, thanks to easing travel and border restrictions. Recent agricultural reforms, including better quality crops and timely availability of inputs, have started to bear fruit although floods and landslides hampered agricultural production. The secondary sector slowed down as major mining companies ceased production pending the renegotiation of their contracts. Inflation averaged 8.3 percent in 2021 (7.3 percent in 2020), driven by rising food prices including wheat flour prices (+25 percent in December 2021). Inflationary pressures are further compounded by spillovers from the war in Ukraine —y/y inflation stood at 11.9 percent in May 2022.
External sector. The CA deficit widened to 13.4 percent of GDP in 2021 (10.2 percent in 2020), mainly due to the recovery in fuel and food imports. Lower oil prices in early 2021, lower imported volume of petroleum products owing to the limited FX availability, and increasing workers’ remittances^² helped contain the CA deficit. Exports receded in 2021 mainly owing to the drop in mining production. The capital and financial accounts improved thanks to IMF flows, supporting an FX reserves buildup to 2.2 months of imports at end-2021 (0.6 month in March 2021). In 2022H1, the authorities exchanged a total of SDR 57 million (US$ 80 million) of their SDR allocation for U.S. dollars to cope with the spillovers from the war in Ukraine. Burundi’s external position for 2021 is substantially weaker than implied by fundamentals and desirable policies. The external sector assessment (ESA, Annex II) reveals a significant misalignment of the real effective ER of 68.6 percent (Text Table 2). The parallel ER market premium stood at 62.5 percent at mid-June 2022.^³
Monetary and financial sectors. Nonperforming loans (NPLs) stood at 4.1 percent at end-September 2021. However, this figure is flattered by regulatory forbearance measures. Indeed, the number of loans that have been restructured is large (one third of loans in commerce). Private credit growth (44.8 percent at end-2021)^⁴ has been supported by the Banque de la République du Burundi (BRB)’s direct lending, government guarantees to para-public projects, and favorable refinancing terms (para. 32). Two new banks were created to target the youth and women.

^{Text Table 2.}

Burundi: EBA-Lite Model Estimates, 2021

(Percent of GDP)

^{^1/}Based on the EBA-lite 3.0 methodology

^{^2/}Additional cyclical adjustment to account for the temporary impact of the pandemic onremittances (0,1 percent of GDP).

^{^3/}Cyclically adjusted, including multilateral consistency adjustments.

^{Text Table 2.}

Burundi: EBA-Lite Model Estimates, 2021

(Percent of GDP)

		CA model ^1/
CA-Actual		-13.4
	Cyclical contributions (from model) (-)	0.6
	COVID-19 adjuster (-) ^2/	0.1
	Additional temporary/statistical factors (-)	0.0
	Natural disasters and conflicts (-)	-0.2
Adjusted CA		-14.0
CA Norm (from model) ^3/		-5.2
	Adjustments to the norm (-)	0.0
Adjusted CA Norm		-5.2
CAGap		-8.8
	o/w Relative policy gap	4.5
Elasticity		-0.13
REER Gap (in percent)		68.6

^{^1/}Based on the EBA-lite 3.0 methodology

^{^2/}Additional cyclical adjustment to account for the temporary impact of the pandemic onremittances (0,1 percent of GDP).

^{^3/}Cyclically adjusted, including multilateral consistency adjustments.

^{Text Table 2.}

Burundi: EBA-Lite Model Estimates, 2021

(Percent of GDP)

		CA model ^1/
CA-Actual		-13.4
	Cyclical contributions (from model) (-)	0.6
	COVID-19 adjuster (-) ^2/	0.1
	Additional temporary/statistical factors (-)	0.0
	Natural disasters and conflicts (-)	-0.2
Adjusted CA		-14.0
CA Norm (from model) ^3/		-5.2
	Adjustments to the norm (-)	0.0
Adjusted CA Norm		-5.2
CAGap		-8.8
	o/w Relative policy gap	4.5
Elasticity		-0.13
REER Gap (in percent)		68.6

^{^1/}Based on the EBA-lite 3.0 methodology

^{^2/}Additional cyclical adjustment to account for the temporary impact of the pandemic onremittances (0,1 percent of GDP).

^{^3/}Cyclically adjusted, including multilateral consistency adjustments.

7. The fiscal deficit is projected to narrow to 5 percent of GDP in 2021/22 (July-June) from 7.8 percent in 2020/21, thanks to strong revenue collection:

Revenue collection is projected at 18.8 percent of GDP in 2021/22 (18.5 percent in 2020/21). Overperformance (1.6 percent of GDP higher than budget projections), reflects new revenue measures (Text Table 3, para. 16, and SIP) and strong VAT and non-tax revenue collection, which compensated a shortfall from petroleum imports revenue in 2021Q4. Vaccine donations are expected to boost grants.
Spending is projected at 28.8 percent of GDP (24.2 percent of GDP in the budget). While the budget includes pandemic-related spending of 1 percent of GDP (excluding vaccines). Additional spending needs include vaccines and associated costs (1.5 percent of GDP)^⁵ and other spending (3.2 percent of GDP), mainly reflecting underbudgeted interest payments and incurred outlays in 2021H2.^⁶ Under-execution of investment (-0.3 percent of GDP) will help contain the deficit.
The fiscal deficit would be financed with government securities issuances, central bank on-lending to the government of the accessed SDR allocation (para. 6), and external financing.

^{Text Table 3.}

Burundi: Impact of Revenue Measures

(Percent of GDP)

Sources: Burundi authorities and IMF staff estimates and projections

^{Text Table 3.}

Burundi: Impact of Revenue Measures

(Percent of GDP)

		2020/21	2021/22	2022/23
		Est.	Proj.
Tax revenue		0.6	0.1	0.7
	Taxes on income, profits, and capital gains	0.0	0.1	0.0
	Taxes on goods St services	0.2	0.2	0.3
	Taxes on international trade & transactions	0.5	0.0	0.4
Other revenue		0.1	0.2	0.0

Sources: Burundi authorities and IMF staff estimates and projections

^{Text Table 3.}

Burundi: Impact of Revenue Measures

(Percent of GDP)

		2020/21	2021/22	2022/23
		Est.	Proj.
Tax revenue		0.6	0.1	0.7
	Taxes on income, profits, and capital gains	0.0	0.1	0.0
	Taxes on goods St services	0.2	0.2	0.3
	Taxes on international trade & transactions	0.5	0.0	0.4
Other revenue		0.1	0.2	0.0

Sources: Burundi authorities and IMF staff estimates and projections

Outlook and Risks

8. Growth is expected to recover somewhat in 2022 and strengthen over the medium term (Text Table 4, Figure 5). It is projected to increase to 3.3 percent in 2022, and progressively stabilize at around 4.6 percent over the medium term, supported by stronger terms of trade, higher agricultural and mining production,^⁷ buoyant services activities, and capital projects. Several World Bank and AfDB projects^⁸ are underway and should be finalized during 2022–25, thus boosting investment and adding to the economy’s productive capacity. These growth drivers are consistent with the PND. In addition to ongoing structural reforms (SIP), the planned use of the SDR allocation to scale up public investment and the less tight import restrictions will support GDP growth and mitigate the effects of the projected fiscal consolidation. The outlook is contingent on a pickup in vaccinations, durable political stability, and reengagement with the international community, with limited though increasing external financing flows.^⁹ Growth will also be supported by addressing governance and corruption vulnerabilities.

^{Text Table 4.}

Burundi: Key Macroeconomic Indicators under the Baseline, 2020–27

Sources: Burundi authorities; and IMF staff estimates and projections.

^{^1/}A statistical adjustment (15 percent) was applied to credit growth to account for the reclassification of a bank—the Urban Housing Promotion Fund became the Burundi Housing Bank in 2021 and is now covered in the monetary survey.

^{^2/}Fiscal year values (July-June) starting in 2019 (i.e. 2019 is FY 2018/19). Includes the grant for the IMF debt service falling due from October 16, 2021 to April 13, 2022, which is subject to the availability of resources under the CCRT.

^{Text Table 4.}

Burundi: Key Macroeconomic Indicators under the Baseline, 2020–27

			2020	2021	2022		2023	2024	2025	2026	2027
			Est.		Budget	Proj.	Proj.
			(annual percentage change)
Real GDP			0.3	3.1	…	3.3	4.1	4.9	5.1	4.8	4.6
CPI (period average)			7.3	8.3	…	11.0	8.0	4.3	4.1	4.1	4.0
Credit to non-government sector ^1/			15.5	44.8	…	20.6	18.7	17.9	18.1	13.7	13.2
			(percent of GDP)
Revenue and grants ^2/			22.2	23.2	22.0	23.8	29.3	28.9	27.7	27.5	27.2
Expenditure ^2/			28.2	31.0	24.2	28.8	36.7	35.1	31.4	30.0	29.5
Overall fiscal balance ^2/			-6.0	-7.8	-2.2	-5.0	-7.4	-6.2	-3.7	-2.6	-2.3
Public gross nominal debt			66.0	66.6	…	66.9	67.7	65.5	61.4	58.1	54.8
	of which: external public debt		17.7	20.2	…	18.9	17.5	16.2	14.9	13.8	12.6
		domestic public debt	48.2	46.3	…	48.0	50.2	49.3	46.5	44.3	42.2
			(annual percentage change, unless otherwise indicated)
Export volume growth (goods)			-21.6	-17.9	…	63.7	0.1	4.3	9.3	4.2	4.3
Import volume growth (goods)			-16.1	-3.8	…	14.1	6.0	4.5	0.4	2.3	2.3
Current account balance (percent of GDP)			-10.2	-13.4	…	-14.4	-14.0	-13.3	-11.2	-10.4	-9.9
Current account balance (US$ million)			-315.2	-450.0	…	-523.3	-556.6	-575.0	-524.5	-530.1	-540.4
Gross international reserves (incl. financing needs)
	(millions of US$)		94.3	266.6	…	263.3	243.7	223.6	227.1	224.3	222.3
	(months of imports of goods and services)		1.0	2.2	…	2.1	1.9	1.7	1.7	1.6	1.5
Memorandum items:
Nominal GDP (billions of Burundi Francs)			5,911	6,613	…	7,416	8,305	9,316	10,457	11,620	12,868
Nominal GDP (in billions of US$)			3.1	3.4	…	3.6	4.0	4.3	4.7	5.1	5.5

Sources: Burundi authorities; and IMF staff estimates and projections.

^{Text Table 4.}

Burundi: Key Macroeconomic Indicators under the Baseline, 2020–27

			2020	2021	2022		2023	2024	2025	2026	2027
			Est.		Budget	Proj.	Proj.
			(annual percentage change)
Real GDP			0.3	3.1	…	3.3	4.1	4.9	5.1	4.8	4.6
CPI (period average)			7.3	8.3	…	11.0	8.0	4.3	4.1	4.1	4.0
Credit to non-government sector ^1/			15.5	44.8	…	20.6	18.7	17.9	18.1	13.7	13.2
			(percent of GDP)
Revenue and grants ^2/			22.2	23.2	22.0	23.8	29.3	28.9	27.7	27.5	27.2
Expenditure ^2/			28.2	31.0	24.2	28.8	36.7	35.1	31.4	30.0	29.5
Overall fiscal balance ^2/			-6.0	-7.8	-2.2	-5.0	-7.4	-6.2	-3.7	-2.6	-2.3
Public gross nominal debt			66.0	66.6	…	66.9	67.7	65.5	61.4	58.1	54.8
	of which: external public debt		17.7	20.2	…	18.9	17.5	16.2	14.9	13.8	12.6
		domestic public debt	48.2	46.3	…	48.0	50.2	49.3	46.5	44.3	42.2
			(annual percentage change, unless otherwise indicated)
Export volume growth (goods)			-21.6	-17.9	…	63.7	0.1	4.3	9.3	4.2	4.3
Import volume growth (goods)			-16.1	-3.8	…	14.1	6.0	4.5	0.4	2.3	2.3
Current account balance (percent of GDP)			-10.2	-13.4	…	-14.4	-14.0	-13.3	-11.2	-10.4	-9.9
Current account balance (US$ million)			-315.2	-450.0	…	-523.3	-556.6	-575.0	-524.5	-530.1	-540.4
Gross international reserves (incl. financing needs)
	(millions of US$)		94.3	266.6	…	263.3	243.7	223.6	227.1	224.3	222.3
	(months of imports of goods and services)		1.0	2.2	…	2.1	1.9	1.7	1.7	1.6	1.5
Memorandum items:
Nominal GDP (billions of Burundi Francs)			5,911	6,613	…	7,416	8,305	9,316	10,457	11,620	12,868
Nominal GDP (in billions of US$)			3.1	3.4	…	3.6	4.0	4.3	4.7	5.1	5.5

Sources: Burundi authorities; and IMF staff estimates and projections.

9. Inflation is projected to rise to 11 percent in 2022 and recede afterwards. With the share of tradable goods in the CPI estimated at 42 percent, inflation pressures are high (Text Table 5)—inflation was projected at 5.5 percent pre-war. The authorities raised domestic pump prices twice in 2022Q1 (20 percent in total) and transportation fees (30 percent). Beyond 2023, inflation is projected to remain contained under the authorities’ current policies focused on boosting, agricultural production, imports substitution policies, price regulations, and FX allocation policy (para. 27).^¹⁰ The BRB’s regulatory initiatives are likely to continue boosting private sector credit in the medium term (para. 32).

^{Text Table 5.}

Burundi: CPI Composition and Contribution to Inflation

Source: ISTEEBU and IMF staff calculations

^{^1/}Includes bread, cereal, sea fruit, oil and grease, coffee, tea, and some soda.

^{Text Table 5.}

Burundi: CPI Composition and Contribution to Inflation

		Weights	Contribution
			Jan-May 2022
Imported goods and services		42.0	6.3
	Food^¹	19.6	3.4
	Clothes and shoes	5.7	0.5
	Housing, Gas, Electricity, and Fuel	8.0	0.9
	Health	2.8	0.8
	Transportation	5.9	0.7
Non imported goods and services		58.0	8.2
	Food, locally produced	10.6	1.9
	Other, non imported	47.4	6.4
Overall		100.0	14.6

Source: ISTEEBU and IMF staff calculations

^{^1/}Includes bread, cereal, sea fruit, oil and grease, coffee, tea, and some soda.

^{Text Table 5.}

Burundi: CPI Composition and Contribution to Inflation

		Weights	Contribution
			Jan-May 2022
Imported goods and services		42.0	6.3
	Food^¹	19.6	3.4
	Clothes and shoes	5.7	0.5
	Housing, Gas, Electricity, and Fuel	8.0	0.9
	Health	2.8	0.8
	Transportation	5.9	0.7
Non imported goods and services		58.0	8.2
	Food, locally produced	10.6	1.9
	Other, non imported	47.4	6.4
Overall		100.0	14.6

Source: ISTEEBU and IMF staff calculations

^{^1/}Includes bread, cereal, sea fruit, oil and grease, coffee, tea, and some soda.

10. External imbalances are projected to persist. The CA deficit would widen significantly in 2022 to 14.4 percent of GDP, partly driven by: (i) deteriorating terms of trade; (ii) vaccines and other COVID-19 related imports; and (iii) easing of import restrictions as the RCF disbursement and SDR allocation improved FX availability. Export volumes would recover, under the impulse of the end of mining contract negotiations and a vibrant food industry. Beyond 2022, the CA deficit would narrow as terms of trade improve slightly and current transfers strengthen. The capital and financial account dynamics reflect mainly donor inflows^¹¹—projections of official inflows are however conservative compared to the prospects from Burundi’s reengagement with the international community, and they account for implementation capacity (para. 12). In the absence of ER and FX market reforms, FX reserves would drop to 2.1 months of imports in 2022, partly owing to the import content of investment projects, and further decrease afterwards in the absence of significant inflows.

11. Burundi is at high risk of external and overall debt distress; and debt is assessed as sustainable contingent on fiscal adjustment, and robust export and growth—debt sustainability analysis (DSA). Public debt stood at 66.6 percent of GDP at end-2021 with key risks stemming from the large stock of domestic debt and liquidity constraints to service external liabilities. Risks to external debt service are mitigated by strong and resilient remittances and prospects of higher FX inflows, including through increased grants and concessional loans. Staff’s assessment of debt sustainability is subject to significant risks, including uncertainties around domestic policies and the external environment. Existing domestic and external imbalances, including the large parallel ER market premium, heighten risks to debt sustainability. Long delays in exchange rate reform could further widen the ER market premium and amplify existing imbalances. Delays in fiscal consolidation, slow implementation of structural reforms, persistent information gap on arrears, and lingering effects of the COVID-19 pandemic or war in Ukraine would heighten debt vulnerabilities as well. A large ER depreciation would worsen debt vulnerabilities in the near term, while being beneficial after the initial shock as external debt is limited.

12. Both upside and downside risks to the outlook are significant (Risk Assessment Matrix, Annex III).

Upside risks. Recently announced in-kind grants from Japan (fuel) and Russia (fuel, fertilizers, medicines, and health equipment) and an expected equity disbursement from a newly signed mining contract (nickel)^¹² would significantly strengthen the BOP and support growth (para. 6). Higher yield of recent revenue measures (para. 16) would increase fiscal space and may improve debt dynamics. Upside potential also includes potentially larger-than-projected external financing from the international community, reflecting recent lifting of U.S. and E.U. sanctions—grants averaged 17.7 percent of GDP per year during 2010–14 compared to 8.6 percent assumed in the baseline medium-term projections. Higher grants would increase fiscal space for public investment and reserve coverage, and thus ease FX access limitations and import rationing, alleviating two significant impediments to growth. Highly concessional long-term external financing would substitute for more expensive domestic financing, reducing borrowing cost and debt vulnerabilities. This Article IV consultation could help boost donor confidence and lay the foundation for a more ambitious reform agenda, including further flexibility in ER management,^¹³ that would enhance competitiveness and boost growth.
Downside risks pertain to (i) domestic policies, notably delays in implementing the policies that underpin the baseline, natural disasters potentially leading to higher domestic inflation, and a deterioration of the political and security situation and (ii) external uncertainties linked to the end of the pandemic and possible stronger and longer spillovers from the war in Ukraine, as well as de-anchoring of inflation expectations, rising energy and food prices, and weak global demand and investor confidence owing to outbreaks of COVID-19 variants.

Authorities’ Views

13. The authorities broadly agreed with staff’s macroeconomic projections, though they were more optimistic on the growth path, notably owing to the potential impact of ongoing reforms. The authorities acknowledged the higher imported inflation and noted that this impact will be limited because of regulation on fuel prices and the ongoing import substitution policy.

Policy Priorities

14. Discussions focused on macroeconomic policies and CD priorities to (i) create fiscal space to cope with the COVID-19 pandemic and the war in Ukraine and accommodate development spending while being attuned to debt vulnerabilities; (ii) restore external sustainability and strengthen the monetary policy framework while containing inflation; (iii) foster financial stability; and (iv) sustain inclusive growth and reduce fragility, including through fiscal governance reforms.

15. A policy mix that balances priority spending needs and addresses debt and external vulnerabilities is required to weather multi-dimensional challenges. On the one hand, spending pressures are high as (i) further execution of the authorities’ COVID-19 response plan (Annex I) is warranted to contain the spread of new variants, including improving the vaccination rate; (ii) social spending needs are heightened by the effects of the war in Ukraine, including to prevent food insecurity; and (iii) Burundi must cater to its development needs, including increasing priority investment to spur sustainable growth and expand social safety nets (SSN) to reduce population fragility (SIP). On the other hand, a multi-pronged policy rebalancing is inevitable and urgent. Reducing debt vulnerabilities with, inter alia, a better-quality fiscal consolidation path achieved with higher revenue and scaled-up investment and prudent borrowing is a top priority (para. 11. ). Furthermore, it is critical to carefully calibrate exit from accommodative MP and undertake in-depth reforms to rebalance ER policy and the monetary policy (MP) framework, while being attuned to financial sector vulnerabilities, to restore external sustainability.

Creating Fiscal Space for Priority Spending

16. Staff expects the 2022/23 fiscal deficit to widen to 7.4 percent of GDP reflecting predominantly higher capital outlays, although partly offset by a notable improvement in tax revenue and grants (Text Tables 6 and 7). The preliminary budget, which envisages a lower deficit, is being prepared under program budget approach, an accelerated reform timeline supported by CD.

Staff projects that revenue would improve by 0.7 percent of GDP to 19.5 percent of GDP, mainly driven by VAT collections, reflecting the full year impact of revenue measures adopted in 2021/22 (para. 7 and Text Table 6) and planned measures (para. 17), although accounting for potential implementation hurdles. International trade taxes will also increase, boosted by higher imports. Project grants would benefit from the lifting of sanctions.
Expenditure is projected to rise in 2022/23 to 36.7 percent of GDP, mainly driven by public investments financed by project grants and the SDR allocation, which would fast-track implementation of the authorities’ public investment plan (PIP), including a regional railway project and road, electricity, and health projects. Reduced COVID-19 expenses will contain spending.
The deficit should be largely financed by domestic resources, including on-lending of the accessed SDR allocation (para. 26. ), and foreign financing.

^{Text Table 6.}

Burundi: Revenue Measures Implemented with the 2021/22 Budget

Sources: Burundi authorities and IMF staff.

^{Text Table 7.}

Burundi: Fiscal Policy, 2020–23^¹

(Percent of GDP unless otherwise indicated)

Sources: Burundi authorities; and IMF staff estimates and projections.

^{^1/}Overperformance of revenue in FY2021/22 reflects new revenue measures and strong VAT and non-tax revenue collection. Additional spending outlays in FY2D21/22 compared to the budget include vaccines and associated costs (1.5 percent of GDP) and other spending (3.2 percent of GDP), mainly reflecting underbudgeted interest payments and incurred outlays in 2021H2. The higher fiscal deficit would be financed with higher government securities issuances, central bank lending to the government, and eternal financing, inclduing the from the IMF RCF.

^{^2/}Covid spending envisaged in the FY2021/22 budget (BIF 70.4 billion or 1 percent of GDP) is not itemized in the budget but is included in some current and investment spending lines such as transfers to hospitals,

^{^3/}Staff projects that the central bank will on-lend in local currency to the government the equivalent of half of the SDR allocation in FV2022/23 (2.6 percent of GDP) and the remainder in FV2023/24 and FV2024/25.

^{Text Table 7.}

Burundi: Fiscal Policy, 2020–23^¹

(Percent of GDP unless otherwise indicated)

					2020/21		2021/22		2022/23
					Budget	Est.	Budget	Proj.	Proj.
Total revenue and grants					22.4	23.2	22.0	23.8	29.3
Of which: Revenue					17.1	18.5	17.2	18.8	19.5
		Grant			5.3	4.7	4.8	5.0	9.8
Total spending					25.2	31.0	24.2	28.8	36.7
Of which: Current					15.4	23.2	14.6	19.5	19.7
			Of which interest		0.9	2.8	0.9	3.2	3.3
			Of which: Covid spending ^2/		0.0	1.1	…	1.5	0.7
		Investment			9.8	7.8	9.6	9.3	17.0
Overall deficit, incl. Grants					-2.8	-7.8	-2.2	-5.0	-7.4
Total financing					2.8	7.8	2.2	5.0	7.4
	Of which: Domestic (net borrowing)				2.2	7.6	2.0	5.4	8.6
				Of which: Central Bank (net) ^3/	0.0	2.7	0.0	-0.8	2.6
			Foreign		0.5	0.4	0.2	4.9	0.4
			Accounts payable (-=repayment)		0.0	2.7	0.0	-3.6	0.0
Memorandum items
GDP at current market prices (BIF billion)					6261.7	6261.7	7014.4	7014.4	7860.5

Sources: Burundi authorities; and IMF staff estimates and projections.

^{Text Table 7.}

Burundi: Fiscal Policy, 2020–23^¹

(Percent of GDP unless otherwise indicated)

					2020/21		2021/22		2022/23
					Budget	Est.	Budget	Proj.	Proj.
Total revenue and grants					22.4	23.2	22.0	23.8	29.3
Of which: Revenue					17.1	18.5	17.2	18.8	19.5
		Grant			5.3	4.7	4.8	5.0	9.8
Total spending					25.2	31.0	24.2	28.8	36.7
Of which: Current					15.4	23.2	14.6	19.5	19.7
			Of which interest		0.9	2.8	0.9	3.2	3.3
			Of which: Covid spending ^2/		0.0	1.1	…	1.5	0.7
		Investment			9.8	7.8	9.6	9.3	17.0
Overall deficit, incl. Grants					-2.8	-7.8	-2.2	-5.0	-7.4
Total financing					2.8	7.8	2.2	5.0	7.4
	Of which: Domestic (net borrowing)				2.2	7.6	2.0	5.4	8.6
				Of which: Central Bank (net) ^3/	0.0	2.7	0.0	-0.8	2.6
			Foreign		0.5	0.4	0.2	4.9	0.4
			Accounts payable (-=repayment)		0.0	2.7	0.0	-3.6	0.0
Memorandum items
GDP at current market prices (BIF billion)					6261.7	6261.7	7014.4	7014.4	7860.5

Sources: Burundi authorities; and IMF staff estimates and projections.

17. The plan to adopt additional revenue measures in the 2022/23 budget is welcome. Those include (i) an excise tax on cigarettes; and (ii) lump sum levies on some products (e.g., drinks).

18. While efforts for domestic revenue mobilization (DRM) and boosting investment are critical, staff recommended to accommodate sufficient COVID-related and social spending in FY2022/23. Given economic scarring risks and low vaccination rates, accommodating COVID-related spending remains important. Expanding the SSN and the funding of existing social programs (SIP) is also critical to help the vulnerable populations cope with the twin shocks—inflationary pressures could entrench living standards losses triggered by the pandemic.

19. Staff advised that the expected fiscal space generated by higher revenues and contained COVID-19 expenditure be partly used for appropriately targeted social programs (SIP) and measures to mitigate the adverse impact of revenue measures. The authorities have improved SSNs in recent years, including providing: (i) free primary education; (ii) an education support fund; (iii) free health care for children under five and women giving birth; and (iv) free care and selected medication. They also reviewed the institutional, legal, and regulatory framework for social protection. The 2021/22 budget expanded social programs targeted at women, the youth, people with disabilities, and natural disaster victims. This will also be essential to shield the vulnerable from the possible adverse impact of some revenue measures (especially those on basic goods and the informal sector) and to foster social cohesion. Efficient targeting will be required to ensure sustainability.

20. Recent spending rationalization and PFM measures are expected to improve efficiency. The 2020/21 and 2021/22 budget laws (i) froze hiring in all public sectors, except defense and security, education, health, and the revenue administration starting July 1, 2021; (ii) adopted a “fair wage policy” to reduce wage disparities in the public sector by using a job classification and rating system, stabilize the wage bill, and improve its predictability;^¹⁴ and (iii) introduced multi-year procurement and payment plans to strengthen investment management.

21. Nonetheless, further gains could be reaped by streamlining tax expenditures. Tax expenditures were much higher than the budgeted envelope in 2020/21 (Text Table 8), mainly driven by government and automatic exemptions for donor and NGO activities. Exemptions for private investors were also large. Staff recommended documenting tax expenditures in budget execution reports and assessing their efficiency.

^{Text Table 8.}

Burundi: Composition of Tax Expenditures

(Percent of GDP)

Sources: Burundi authorities

^{^1/}Including agricultural inputs and veterinary products

^{Text Table 8.}

Burundi: Composition of Tax Expenditures

(Percent of GDP)

	FY2020/21	Jul 2021 -Jan 2022
Investors	0.8	0.4
Non-profit and private organizations	0.2	0.1
Personal items	0.01	0.01
Foreign-financed projects	1.0	0.5
Medicines and Pharmaceuticals	0.3	0.1
Government and its entities	1.2	0.3
Non-Governmental Organizations	0.1	0.1
Other exemptions ^1/	0.01	0.01
Total	3.6	1.4

Sources: Burundi authorities

^{^1/}Including agricultural inputs and veterinary products

^{Text Table 8.}

Burundi: Composition of Tax Expenditures

(Percent of GDP)

	FY2020/21	Jul 2021 -Jan 2022
Investors	0.8	0.4
Non-profit and private organizations	0.2	0.1
Personal items	0.01	0.01
Foreign-financed projects	1.0	0.5
Medicines and Pharmaceuticals	0.3	0.1
Government and its entities	1.2	0.3
Non-Governmental Organizations	0.1	0.1
Other exemptions ^1/	0.01	0.01
Total	3.6	1.4

Sources: Burundi authorities

^{^1/}Including agricultural inputs and veterinary products

22. Under current policies, gradual fiscal consolidation over the medium term would put the public debt ratio on a downward trajectory. Revenue collection would modestly strengthen, thanks to continued DRM efforts. Spending would gradually decline with investment receding after the scaling-up of 2022/23 and 2023/24, rationalization measures (para. 20), and unwinding COVID-19 related spending. The fiscal deficit would gradually narrow to about 2 percent of GDP, despite conservative donor inflows (para. 10 and para. 12), and public debt would decline to about 55 percent of GDP.

23. Staff recommended a more ambitious medium-term fiscal consolidation, supported by quality scaling-up of DRM, investment, and SSNs to decisively reduce debt vulnerabilities and support policy recalibration. Stronger fiscal consolidation efforts are needed to bring the PV of debt-to-GDP ratio closer to its indicative benchmark of 35 percent of GDP and strengthen public debt sustainability (DSA). To this end, staff recommended:

Stronger DRM, including by improving compliance with further digitalization and widening the tax base, accelerating the implementation of new measures (Text Table 9), and creating a unique taxpayer identification number to facilitate controls. The authorities also plan to strengthen dividend collection from public enterprises and excise taxes. An upcoming diagnostic CD mission (Fall 2022) will help design a medium-term revenue strategy. However, considerations must be given to striking a balance between DRM and possible social costs.
Spending rationalization and recalibration by continuing to shift the spending mix^¹⁵ towards investment—public investment remains below ratios in peer countries. A gradual shift would ensure efficient planning and selection of mature high-return projects. Staff recommended CD on public investment management. Staff reiterated the recommendation made at the RCF disbursement stage that, owing to external vulnerabilities, the SDR allocation should be primarily devoted to bolstering FX reserves coverage.

^{Text Table 9.}

Burundi. Revenue Measures Envisaged in the 2021/22 Budget and not yet Implemented

Sources: Burundi authorities and IMF staff.

Authorities’ Views

24. The authorities reiterated their commitment to DRM and prudent borrowing to create space for investment while ensuring debt sustainability. They welcomed CD offers and noted that efficient planning will help account for absorptive capacity. They saw digitalization as having major potential to increase VAT collections through electronic billing and digital payment systems and that they aim to increase mining revenues through the ongoing mining sector reform. The authorities underscored efforts to further widen the tax base by capturing activities in the informal sector and land transactions and ownership. They argued that tax exemptions are mainly linked to donor and international rules.

25. The authorities noted that their spending policies are guided by Burundi’s PND. They view the new “fair wage policy” as an angular reform, which will reduce salary inequities in the public service and boost public service efficiency. They agreed with the need to protect social spending and highlighted that their ability to scale up social programs beyond recent reforms is constrained by financing. They flagged that their ambitious PIP would boost economic growth, hence reducing debt vulnerabilities and attracting foreign investment and FX inflows. They explained that expediting the implementation of program budgeting was important to better align public spending with government objectives.

Enroute for Exchange Rate Unification

Ensuring External Sustainability

26. Burundi’s external imbalances are large, although the SDR allocation provided a much-needed relief. Vulnerabilities include a weak external position, large CA deficit, FX reserves below adequacy levels, and significant REER misalignment (para. 6 and para. 10). While the SDR allocation helped, the authorities plan to use it to finance investment. Staff projects on-lending of half of the SDR allocation in 2022/23 (2.6 percent of GDP) and the remainder in 2023/24 and 2024/25.

27. The BRB has undertaken several measures to manage FX reserves (SIP). Exporters are required to surrender to the BRB all exports proceeds at the official ER. The BRB is the sole seller in the FX interbank market. FX allocations to commercial banks are directed to imports deemed priority, including medicines, fuel, and investment-related imports. FX allocation decisions (on importers, amount, and timing) also account for the need to contain inflation. There is anecdotal evidence of uneven FX allocation across banks, which increases the structural bottleneck.

28. Staff stressed that external policy recalibration is essential to ensure external sustainability, including unification of the official and parallel ER as early as possible and rebuilding FX buffers. There are two possible approaches (Text Table 10):

i. A gradual adjustment within a target period. The official ER would gradually decrease, following a rule or a discretionary path until it reaches its equilibrium level, preferably within a short period. This approach bears the advantage of allowing a smoother adjustment of economic actors, including the financial sector. A gradual approach would be costly in terms of FX reserves and may delay gains from removing FX distortions. It is nonetheless feasible as the SDR allocation and surrender requirements have reinforced FX buffers.
ii. An immediate large adjustment (“instant unification”). The official ER would instantly depreciate to a level that would alleviate the FX market distortions, determined based on the real effective ER misalignment and the parallel ER market premium. This approach would highly boost investor confidence.

^{Text Table 10.}

Burundi: Approaches to Exchange Rate Unification

^{Text Table 10.}

Burundi: Approaches to Exchange Rate Unification

	Instant unification	Gradual unification
Advantages	Instantly eliminates distortions and inefficiencies stemming from the parallel market. Easier to communicate than a gradual unification. Fiscal benefits. For example, increase in the domestic currency value of taxes on international trade. Higher credibility of policy adjustment.	Offers agents (including budgetary authorities) time to adjust smoothly and avoid disruptive effects. Allows time to design a post-unification monetary policy framework and strengthen the alternative monetary anchor.
Disadvantages /risks	Potentially disruptive if sizable segments of the economy have currency mismatches or are exposed to sharp exchange rate fluctuations in other ways, including via large implicit subsidies generated by the misaligned official rate. For example, exchange rate depreciation may hamper the ability to service external debt. Sharp exchange rate depreciation could trigger a sudden spike in domestic inflation and possibly second-round effects.	Risks getting derailed during the transition phase due to several interlinked factors: ✓ Possible speculative attacks, especially if FX reserves become critically low during the transition. ✓ Shocks to the equilibrium exchange rate during the transition may generate uncertainty regarding the path and timing of the unification and the authorities’ commitment. Credibility issues will be particularly high if the transition period is too long. Offers more scope for continuing rent seeking activities and for special interest groups to attempt stalling the unification. FX market and availability may deteriorate during the transition while benefits will mostly accrue once the unification is achieved.

^{Text Table 10.}

Burundi: Approaches to Exchange Rate Unification

	Instant unification	Gradual unification
Advantages	Instantly eliminates distortions and inefficiencies stemming from the parallel market. Easier to communicate than a gradual unification. Fiscal benefits. For example, increase in the domestic currency value of taxes on international trade. Higher credibility of policy adjustment.	Offers agents (including budgetary authorities) time to adjust smoothly and avoid disruptive effects. Allows time to design a post-unification monetary policy framework and strengthen the alternative monetary anchor.
Disadvantages /risks	Potentially disruptive if sizable segments of the economy have currency mismatches or are exposed to sharp exchange rate fluctuations in other ways, including via large implicit subsidies generated by the misaligned official rate. For example, exchange rate depreciation may hamper the ability to service external debt. Sharp exchange rate depreciation could trigger a sudden spike in domestic inflation and possibly second-round effects.	Risks getting derailed during the transition phase due to several interlinked factors: ✓ Possible speculative attacks, especially if FX reserves become critically low during the transition. ✓ Shocks to the equilibrium exchange rate during the transition may generate uncertainty regarding the path and timing of the unification and the authorities’ commitment. Credibility issues will be particularly high if the transition period is too long. Offers more scope for continuing rent seeking activities and for special interest groups to attempt stalling the unification. FX market and availability may deteriorate during the transition while benefits will mostly accrue once the unification is achieved.

29. While the choice will be guided by practical considerations, including the political economy, other key policy decisions must be made in conjunction with the ER unification. The approach to ER unification should account for FX reserves coverage, the global environment, and associated financial sector risks. Clear supportive communication would also be important. Country experiences suggest that the impact on inflation is usually limited where the size of the parallel ER market is large; however, this has to be ascertained for Burundi. Nonetheless, both approaches to ER unification bear risks that may require tighter monetary policy (MP) and financial regulation and supervision, in addition to prudent external debt management. The impact on financial sector stability will likely be limited as currency mismatches appear limited. Other policy decisions include a post-unification ER policy, possibly a managed float, an efficient MP framework, as well as fiscal consolidation and plans to exit monetary financing.

Authorities’ Views

30. The authorities reiterated their commitment to maintaining macroeconomic stability, including external and debt sustainability. They acknowledged the large parallel ER market premium and external imbalances and stressed the need to carefully design any reform agenda to Burundi’s characteristics. They cautioned against the potential inflationary impact of a sharp ER depreciation, which would predominantly affect the vulnerable population. The authorities appreciated the ongoing discussions on (i) cross-country experiences on ER unification and reforms; (ii) options of post-unification ER regimes and MP framework and instruments; (iii) fiscal and monetary policy coordination; and potential socio-economic implications and look forward to the upcoming CD mission. The authorities agreed that financial stability risks are muted. They acknowledged the need for a multi-pronged policy adjustment and reminded that the large ER parallel market premium was triggered by the sudden drop in donor support during the crisis. They stressed that ER unification would be facilitated by higher donor support. The authorities stressed their commitment to agree with staff on a policy reform roadmap, which will guide their actions in implementing the ER reform in the medium term, while accounting for the specificities of Burundi’s economy as well as the economic and socio-political implications of the reform.

Monetary Policy Challenges and Framework

31. BRB’s MP framework is elaborate, albeit in need of improvement. The overarching objective of the MP is price stability, which is achieved through quantitative targeting of monetary aggregates and other instruments (SIP). Statutory advances were officially discontinued in 2017, although indirect monetary financing has surged since the pandemic. The budget is mainly financed through government securities. The interbank market functions relatively well, with little segmentation but low transaction volume. The efficiency of MP transmission and its impact on inflation management is limited.

32. The BRB supported banks’ liquidity during the pandemic and encouraged long-term loans to priority sectors using its regular instruments and quasi-fiscal tools, with however unintended effects. Measures included (i) increasing liquidity provisions (+16 percent in 2020 compared to 2019); (ii) creating a refinancing window that provides to banks long-term liquidity (5 years, renewable once) at subsidized interest rate (2 percent), which banks lend to priority sectors at a maximum rate of 8 percent and maturity of up to 10 years; (iii) extending direct and indirect loans to the Treasury to support the production of coffee, fertilizer, and maize; (iv) relaxing loan restructuring provisions to allow a fourth restructuring. These measures have been efficient in supporting banks’ health and boosting credit. However, the long-term refinancing window has decreased the buoyancy of the regular 7-day refinancing window. The efficiency of the overnight interest rate remains limited.

33. Staff stressed that considering ongoing inflationary pressures and rapid credit growth, the BRB should prepare to wind down the long-term refinancing window and carefully calibrate the exit from other measures. The sharp surge in inflation has raised challenges for MP and the “fair wage policy” is likely to raise public sector wages in the near term. MP challenges are further compounded by the fact that inflation is mostly driven by volatile supply factors, which might limit the efficacy of MP in stabilizing prices. Therefore, cautious forward-looking monetary policy making is warranted. Inflationary risks are however mitigated by regulated prices and limited risks of wage-price spirals—the “fair wage policy” will help contain pressures and private sector wages are unlikely to catch up as informal jobs are predominant. Timely signaling should be given to the market before unwinding the new refinancing window. Staff however acknowledges the positive impact of MP measures on credit growth and the opportunity costs of prematurely deferring accommodative monetary policy, as fiscal space is limited.

34. A MP framework geared towards using interest rates would support the plans for ER unification, while ensuring a transition towards the Eastern African Community (EAC) directive to adopt inflation targeting (IT) in the future. Staff advised against direct private sector financing and creating new instruments to finance the economy in the future and recommended reducing monetary financing, which will help prepare for ER unification (para. 28 and para. 29). Staff advocated strengthening the efficiency of the MP framework’s regular instruments, including interest rates transmission, deepening the interbank market, and designing an efficient communication framework, building on upcoming CD to strengthen domestic and FX-related liquidity forecasting and macro-modeling.

Authorities’ Views

35. The authorities concurred with staff on the need to modernize the MP framework and strengthen the interest rate link. They emphasize that the new window has supported the banking sector and helped provide credit to previously underserved sectors (agriculture and industry), which was key in the economy’s resilience to the pandemic. The authorities acknowledged that it is tricky to calibrate the timing to unwind MP support and highlighted that they used to have regular communications to the public and will consider revamping their communication strategy. They noted that technical preparations to transition to an IT framework as per the EAC’s directives are advanced.

Fostering Financial Sector Stability

36. While the banking sector is diversified and appears healthy, caution is advised. There are 14 commercial banks with total assets amounting to 60 percent of GDP and credit to the private sector exceeding 20 percent of GDP. Vulnerabilities seem subdued with capital ratios of around 20 percent, higher than the regulatory requirement and the net open FX positions are negligible (Figure 4 and SIP). Although stable, NPLs are concentrated in certain sectors, including trade (27.1 percent), real estate (15.7 percent), and transportation (12.8 percent) and their low level is partly due to write-offs and increased loan restructurings.^¹⁶ Staff advised a forward-looking approach to supervision to detect emerging tensions.

Authorities’ Views

37. The authorities look forward to continued CD to improve regulatory and supervisory frameworks. They agreed with the importance of strengthening supervisory frameworks and related financial stability assessments and underscored that they do not foresee major financial stability issues related to ER unification and FX market liberalization.

Unlocking Sustainable Inclusive Growth

38. Burundi’s fragility is high. Burundi’s average CPIA score was 2.9 in 2019, well below the 3.2 threshold for fragility, and its poverty rate stood at 85 percent in 2020. The country faces multidimensional fragility (SIP), including regarding social inclusion and equity. The pandemic has worsened social outcomes, notably poverty, inequality, employment, and gender issues.

39. Competitiveness is challenged (SIP). The country ranks low on competitiveness indicators, particularly these related to utility infrastructure such as electricity access and exposure to unsafe drinking water. Other constraints include low digitalization and productivity, limited competition owing to dominant SOEs, lack of collateral and credit bureaus, and skill mismatches. Climate shocks, including droughts and floods, often led to growth swings. A growth accounting decomposition shows that economic growth has been mainly driven by higher capital and labor, while negative productivity growth weighed on growth, especially in 2015 and 2016. Reforms to enhance human capital, improve health conditions, as well as support physical capital accumulation and enhance productivity would help promote private sector development and growth.

40. Boosting growth will also require further enhancing governance and tackling corruption. Reflecting the early stages of reengagement and related information gaps on Burundi’s broad governance framework, staff presented the Fund’s 2018 Enhanced Governance Framework and offered CD for a Governance Diagnostic Assessment.

41. Work on commitments on the transparency and audit of spending related to COVID-19 and the SDR allocation, taken under the CCRT and RCF disbursement, is ongoing.

The authorities accelerated the preparation of the budget review laws (Loi de Règlements) for 2016 onwards to meet the CCRT’s commitment to produce the 2020/21 report—the deadline of March 2022 was only slightly passed. The RCF and SDR allocation-related spending will concomitantly be audited in the context of the related budget review laws.
The authorities prepared in mid-August 2021 the first COVID-19 spending report, covering spending up to August 10, 2021—RCF’s commitment to preparing, starting end-December 2021, bi-annual reports on COVID-19 spending audited by the Court of Auditors (Cour des Comptes, SIP) and published on the ministry’s website within three months of the end of each semester. The audit report has been delayed by the backlog of budget execution reports.
The authorities committed to collecting information on the ultimate beneficial ownership (BO) of companies that were awarded COVID-related contracts starting in end-December 2021. The 2018 procurement law requires publishing procurement plans by end-February of each year and auctioning of public contracts (SIP); however, BO information is not being collected. Staff discussed the possibility of targeted legal drafting assistance on secondary legislation to enhance transparency and accountability of public procurement (Financial Action Task Force recommendation). Burundi’s AML/CFT framework also needs to be aligned with international standards and its newly setup financial intelligence unit should be made fully operational. Staff advises fast implementation of the steps required for full membership in the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG)—a FATF-style regional body. An update of the 2012 PEFA assessment is planned in 2022.

Authorities’ Views

42. The authorities agreed that boosting economic growth will require ambitious structural reforms and rigorous project implementation. They noted that climate change poses a challenge to growth in Burundi and emphasized that the two new banks for the youth and women will be useful in that regard.

43. The authorities noted that the audit of COVID-19 spending is ongoing and reiterated their commitment to collect information on ultimate BO of COVID-related contracts. The first report on COVID operations was transmitted to the Court of Auditors on August 13, 2021, covering spending from December 24, 2020, to August 10, 2021 (0.4 percent of GDP). Its audit started in April due to the backlog of audits of budget review laws--this has been resolved and the Court of Auditors published the audit reports covering 2016–2021. The authorities noted that the audit of the budget review law for 2020/21 has also reviewed concurrent COVID-related spending. The authorities noted that in the past, they were able to identify the ultimate BO of some companies awarded government contracts. The changes in the regulatory framework would facilitate the automatic collection of BO information.

Other Issues

44. Article VIII. Since the 2014 Article IV consultation, the authorities have introduced important changes to the FX system. Staff discussed with the authorities measures that could possibly constitute exchange restrictions and multiple currency practices (MCPs, see Informational Annex, IA) inconsistent with Article VIII, sections 2(a), 3, and 4. This includes a surrender requirement, prioritization of FX allocation, and limits on FX availability for certain transactions. Staff will collect further information, mainly from market participants to conduct further assessment.

45. Data adequacy and capacity development. Data is assessed broadly adequate for surveillance, with notable improvements since 2014 supported by CD, including regarding the accuracy, timeliness, and coverage of data. Notably, BOP data were broadened, and staff’s baseline macroframework reflects official national accounts data from 2020 (Annex V and IA). The authorities have initiated steps towards adopting e-GDDS standards. An CD strategy was elaborated and discussed with the authorities—key priorities include DRM, PFM, monetary and ER policy, and statistics (including GDP rebasing).

46. Other. An updated safeguards assessment is ongoing (IA)—the first one since 2012.

Staff Appraisal

47. Burundi’s economy is striving to rebound from three shocks: the 2015 political and security crisis, the COVID-19 health shock, and the war in Ukraine. Although the recovery from the political crisis was halted, the economy has shown resilience to the pandemic with output growth remaining positive and accelerating in 2021. The authorities’ COVID-19 response plan helped contain the virus spread, though vaccination remains low.

48. Spillovers of the war in Ukraine are compounding the effects of the pandemic and are threatening the nascent economic recovery. Spillovers are mainly linked to trade with disruptions to supply chains, including to Ukraine’s ability to exports, sanctions against Russia and Belarus, and the hoarding behavior of major food producers, raising food and fuel imports prices. Lower export prices weigh on export receipts. The outlook for 2022 is positive with growth set to increase only modestly to 3.3 percent and inflation to reach 11 percent. Deteriorating terms of trade have put pressure on below-adequacy FX reserves, increasing fuel shortages and transportation disruptions. Nevertheless, both positive and downside risks are significant, with on the upside recent announcements of grants and a new mining contract and prospects of higher donor funding reflecting the lifting of all sanctions linked to the 2015 political and security crisis.

49. A policy mix recalibration is needed to address Burundi’s debt vulnerabilities and external imbalances. With public debt at 66.5 percent of GDP at end-2021 and expected to decrease gradually over the medium term, Burundi’s debt is sustainable with high risk of debt distress. The external position is weak with FX reserve coverage at 2.2 months of imports at end-2021 and projected to further weaken, and there is a large parallel ER market premium. A recalibrated fiscal, exchange rate, monetary, and financial policy mix is necessary to address the vulnerabilities and face the effects of the ongoing twin shocks.

50. An ambitious fiscal consolidation underpinned by DRM is critical to address debt vulnerabilities while protecting priority COVID-related, social, and investment spending. Staff welcome the authorities’ decision to allow domestic price adjustments, which limited the impact of the shock on subsidies and the budget. Staff also welcome the near-term budget focus on health, social, and infrastructure spending. However, going forward, it is critical to further bolster DRM including with further digitalization, tax base widening, and improvements in compliance. Further shifting the spending mix towards investment while protecting social spending will support growth and an exit from fragility.

51. Staff welcome the authorities’ plan to unify the official and parallel ER market in the medium term, building on IMF CD. The choice between a gradual adjustment and an instant approach will ultimately be guided by FX buffers, financial sector vulnerabilities, and the choices of post-unification ER policy and monetary policy framework, as well as the political economy. Other supportive reforms, including tighter MP, FX market liberalization and growth-supportive reforms, will be required.

52. Considering ongoing inflationary pressures and rapid credit growth, the BRB should prepare to wind down the use of the special refinancing window with timely signaling to the market and recalibrate temporary measures. Winding down MP measures should be mindful of the large opportunity costs of prematurely withdrawing monetary policy accommodation, particularly as fiscal space is limited and increased liquidity injections and regulatory easing since 2020 have supported commercial banks’ health during the pandemic.

53. Boosting growth will require structural reforms to unlock growth bottlenecks, including addressing the roots of fragility and enhancing competitiveness and governance. Staff welcome ongoing reforms to support growth and reduce poverty and recommends accelerating the implementation of the PND reform agenda. Staff commends the authorities’ efforts to fast track the preparation of the budget review laws covering 2016–2021 to meet the CCRT’s commitment to finalize the 2020/21 report by March 2022. Staff is encouraged by the preparation of the first COVID-19 spending report in August 2021. Staff encourages collecting information on the ultimate beneficial ownership of companies that were awarded COVID-related contracts.

54. It is expected that the next Article IV consultation for Burundi will take place on the standard 12-month cycle.

^{Table 1.}

Burundi: Selected Economic Indicators, 2019–27

Sources; Burundi authorities; and IMF staff estimates and projections,

^{^2/}Fiscal year values (July-June) starting in 201 & (i.e. 201 & is FV 2018/19), Includes Covid-related fiscal measures starting in FV2020/21.

^{^3/}Includes vaccine donations (starting in FY2021/22) and the grant for the IMF debt service falling due from October 16, 2021 to April 13, 2022 under the CCRT, Starting with FY2025/23. grants also include project grants from the US and the EU, Grants averaged 17,7 percent of GDP per year during 5010–14, before the 2015 political crisis.

^{Table 1.}

Burundi: Selected Economic Indicators, 2019–27

			2019	2020		2021		2022	2023	2024	2025	2026	2027
			Est.	Pre-Covid	Est.	Pre-Covid	Est.	Proj.
			(Annual percentage change, unless otherwise indicated)
Output, prices, and exchange rate
Real GDP			1.8	2 1	0.3	2.1	3.1	3.3	4.1	4.9	5.1	4.8	4.6
GDP deflator			0.8	5.7	6.0	5.3	8.5	8.6	7.6	7.0	6.8	6.1	5.9
CPI (period average)			-0.7	5.6	7.3	5.2	8.3	11.0	8.0	4.3	4.1	4.1	4.0
CPI (end of period)			5.1	7.5	7.5	7.5	10.1	8.6	7.5	1.7	6.2	2.4	5.4
Terms of trade (- =deterioration)			53.3	5.9	-12.3	2.1	-8.4	-4.2	0.9	1.1	1.4	0.4	0.0
Money and credit
Broad Money (M2)			23.9	20.9	25.4	19.8	22.3	18.2	16.1	16.4	16.5	15.4	15.1
Credit to non-government sector ^1/			17.7	7.8	15.5	7.5	44.8	20.6	18.7	17.9	18.1	13.7	13.2
M2/GDP (percent)			36.2	374	42.7	41.4	46.7	49.2	51.0	53.0	55.0	57.1	59.3
			(Percent of GDP, unless otherwise indicated)
Central government budget ^2/
Revenue and grants			20.4	21.8	22.2	22.0	23.2	23.8	29.3	28.9	27.7	27.5	27.2
	of which’, grants ^3/		4.0	45	4.3	4.6	4.7	5.0	9.8	9.5	8.2	7.9	7.6
	of which’, revenue		16.4	174	17.9	17.4	18.5	18.8	19.5	19.4	19.5	19.5	19.6
Expenditure			26.5	28.3	28.2	27.9	31.0	28.8	36.7	35.1	31.4	30.0	29.5
Expense			18.0	19.1	20.3	18.8	23.2	19.5	19.7	19.3	18.6	18.4	18.3
Net acquisition of non-financial assets			8.5	9.2	7.9	9.0	7.8	9.3	17.0	15.8	12.8	11.6	11.2
Primary balance			-4.2	-5.0	-3.1	-3.1	-5.0	-1.8	-4.1	-3.0	-0.6	0.4	0.5
Overall balance			-6.2	-6.5	-6.0	-5.8	-7.8	-5.0	-7.4	-6.2	-3.7	-2.6	-2.3
Excluding grants			-10.2	-11.0	-10.3	-10.5	-12.5	-10.0	-17.2	-15.6	-11.9	-10.5	-9.9
Net acquisition of financial assets			1.8	-0.5	1.2	0.0	2.9	1.7	1.6	1.5	0.2	-0.7	0.2
Net domestic borrowing			5.5	3.9	4.5	5.2	7.6	5.4	8.6	7.4	3.8	1.8	2.5
Net foreign borrowing			1.7	0.8	0.6	0.6	0.4	4.9	0.4	0.2	0.1	0.1	0.0
Accounts payable			0.7	13	2.1	0.0	2.7	-3.6	0.0	0.0	0.0	0.0	0.0
Public debt
Public gross nominal debt			60.0	59.7	66.0	61.5	66.6	66.9	67.7	65.5	61.4	58.1	54.8
of which: external public debt			18.3	175	17.7	16.9	20.2	18.9	17.5	16.2	14.9	13.8	12.6
		domestic public debt	41.7	42 2	48.2	44.5	46.3	48.0	50.2	49.3	46.5	44.3	42.2
Investment and savings
Investment			19.3	19.3	19.8	19.4	19.8	24.1	25.0	22.4	21.0	20.8	20.5
	Public		5.2	4.5	4.2	4.5	5.2	11.1	11.9	9.2	7.8	7.6	7.3
	Private		14.1	148	15.6	14.9	14.6	13.0	13.1	13.2	13.2	13.2	13.2
Savings			7.7	24	9.6	2.9	6.4	9.7	10.9	9.0	9.9	10.4	10.6
	Public		-1.2	-16	-2.4	-1.4	1.0	3.7	4.3	4.5	5.1	5.2	5.1
	Private		9.0	4.0	12.0	4.3	5.4	6.0	6.7	4.6	4.7	5.2	5.5
External sector
Exports (goods and services)			9.9	9.9	8.8	10.1	7.5	10.5	9.8	9.5	9.6	9.5	9.4
Imports (goods and services)			33.7	35.6	33.1	35.4	35.5	39.2	37.9	36.3	33.6	32.3	31.2
Trade Balance (goods and services)			-23.8	-25.7	-24.3	-25.3	-28.0	-28.7	-28.1	-26.7	-24.0	-22.8	-21.9
Current account balance (incl. budget support)			-11.6	-16.9	-10.2	-16.4	-13.4	-14.4	-14.0	-13.3	-11.2	-10.4	-9.9
Current account balance (exd. budget support)			-11.6	-16.9	-10.2	-16.4	-13.4	-14.4	-14.5	-13.8	-11.7	-10.9	-10.4
Memorandum items;
Official current transfers			0.0	0.0	0.0	0.0	0.0	0.0	0.5	0.5	0.5	0.5	0.5
Official capital transfers ^3/			4.5	4.5	4.4	4.5	4.4	10.1	10.2	7.9	7.6	7.4	6.9
GDP at current market prices
In billions of Burundi Francs			5,560	6,191	5,911	6,657	6,613	7,416	8,305	9,316	10,457	11,620	12,868
In billions of US$			3.0	3.2	3.1	3.4	3.4	3.6	4.0	4.3	4.7	5.1	5.5
Gross international reserves
	In millions of US$		113.4	1134	94.3	113.4	266.6	263.3	243.7	223.6	227.1	224.3	222.3
	In months of next year imports		1.3	11	1.0	1.1	2.2	2.1	1.9	1.7	1.7	1.6	1.5
GDP per capita (Nominal US$)			261.3	273.0	259.9	275.8	274.0	289.3	305.4	322.9	341.7	357.9	373.6
Export volume growth (goods, in percent)			-4.7	-07	-21.6	2.7	-17.9	63.7	0.1	4.3	9.3	4.2	4.3
Import volume growth (goods, in percent)			44.5	0.5	-16.1	2.2	-3.8	14.1	6.0	4.5	0.4	2.3	2.3
Population (million)			11.5	11 9	11.9	12.2	12.2	12.6	13.0	13.4	13.8	14.2	14.6
Health and social spending ^2/
	Health		1.6	2.9	1.9	1.7	3.6	3.3		...	...	...	...
	Social		2.5	2.9	3.0	3.2	3.2	3.1	...	...	...	...	...
Human Development Index Score (HDI/UNDP)			0.4	...	...	...	...	...	...	...	...	...	...

Sources; Burundi authorities; and IMF staff estimates and projections,

^{^2/}Fiscal year values (July-June) starting in 201 & (i.e. 201 & is FV 2018/19), Includes Covid-related fiscal measures starting in FV2020/21.

^{Table 1.}

Burundi: Selected Economic Indicators, 2019–27

			2019	2020		2021		2022	2023	2024	2025	2026	2027
			Est.	Pre-Covid	Est.	Pre-Covid	Est.	Proj.
			(Annual percentage change, unless otherwise indicated)
Output, prices, and exchange rate
Real GDP			1.8	2 1	0.3	2.1	3.1	3.3	4.1	4.9	5.1	4.8	4.6
GDP deflator			0.8	5.7	6.0	5.3	8.5	8.6	7.6	7.0	6.8	6.1	5.9
CPI (period average)			-0.7	5.6	7.3	5.2	8.3	11.0	8.0	4.3	4.1	4.1	4.0
CPI (end of period)			5.1	7.5	7.5	7.5	10.1	8.6	7.5	1.7	6.2	2.4	5.4
Terms of trade (- =deterioration)			53.3	5.9	-12.3	2.1	-8.4	-4.2	0.9	1.1	1.4	0.4	0.0
Money and credit
Broad Money (M2)			23.9	20.9	25.4	19.8	22.3	18.2	16.1	16.4	16.5	15.4	15.1
Credit to non-government sector ^1/			17.7	7.8	15.5	7.5	44.8	20.6	18.7	17.9	18.1	13.7	13.2
M2/GDP (percent)			36.2	374	42.7	41.4	46.7	49.2	51.0	53.0	55.0	57.1	59.3
			(Percent of GDP, unless otherwise indicated)
Central government budget ^2/
Revenue and grants			20.4	21.8	22.2	22.0	23.2	23.8	29.3	28.9	27.7	27.5	27.2
	of which’, grants ^3/		4.0	45	4.3	4.6	4.7	5.0	9.8	9.5	8.2	7.9	7.6
	of which’, revenue		16.4	174	17.9	17.4	18.5	18.8	19.5	19.4	19.5	19.5	19.6
Expenditure			26.5	28.3	28.2	27.9	31.0	28.8	36.7	35.1	31.4	30.0	29.5
Expense			18.0	19.1	20.3	18.8	23.2	19.5	19.7	19.3	18.6	18.4	18.3
Net acquisition of non-financial assets			8.5	9.2	7.9	9.0	7.8	9.3	17.0	15.8	12.8	11.6	11.2
Primary balance			-4.2	-5.0	-3.1	-3.1	-5.0	-1.8	-4.1	-3.0	-0.6	0.4	0.5
Overall balance			-6.2	-6.5	-6.0	-5.8	-7.8	-5.0	-7.4	-6.2	-3.7	-2.6	-2.3
Excluding grants			-10.2	-11.0	-10.3	-10.5	-12.5	-10.0	-17.2	-15.6	-11.9	-10.5	-9.9
Net acquisition of financial assets			1.8	-0.5	1.2	0.0	2.9	1.7	1.6	1.5	0.2	-0.7	0.2
Net domestic borrowing			5.5	3.9	4.5	5.2	7.6	5.4	8.6	7.4	3.8	1.8	2.5
Net foreign borrowing			1.7	0.8	0.6	0.6	0.4	4.9	0.4	0.2	0.1	0.1	0.0
Accounts payable			0.7	13	2.1	0.0	2.7	-3.6	0.0	0.0	0.0	0.0	0.0
Public debt
Public gross nominal debt			60.0	59.7	66.0	61.5	66.6	66.9	67.7	65.5	61.4	58.1	54.8
of which: external public debt			18.3	175	17.7	16.9	20.2	18.9	17.5	16.2	14.9	13.8	12.6
		domestic public debt	41.7	42 2	48.2	44.5	46.3	48.0	50.2	49.3	46.5	44.3	42.2
Investment and savings
Investment			19.3	19.3	19.8	19.4	19.8	24.1	25.0	22.4	21.0	20.8	20.5
	Public		5.2	4.5	4.2	4.5	5.2	11.1	11.9	9.2	7.8	7.6	7.3
	Private		14.1	148	15.6	14.9	14.6	13.0	13.1	13.2	13.2	13.2	13.2
Savings			7.7	24	9.6	2.9	6.4	9.7	10.9	9.0	9.9	10.4	10.6
	Public		-1.2	-16	-2.4	-1.4	1.0	3.7	4.3	4.5	5.1	5.2	5.1
	Private		9.0	4.0	12.0	4.3	5.4	6.0	6.7	4.6	4.7	5.2	5.5
External sector
Exports (goods and services)			9.9	9.9	8.8	10.1	7.5	10.5	9.8	9.5	9.6	9.5	9.4
Imports (goods and services)			33.7	35.6	33.1	35.4	35.5	39.2	37.9	36.3	33.6	32.3	31.2
Trade Balance (goods and services)			-23.8	-25.7	-24.3	-25.3	-28.0	-28.7	-28.1	-26.7	-24.0	-22.8	-21.9
Current account balance (incl. budget support)			-11.6	-16.9	-10.2	-16.4	-13.4	-14.4	-14.0	-13.3	-11.2	-10.4	-9.9
Current account balance (exd. budget support)			-11.6	-16.9	-10.2	-16.4	-13.4	-14.4	-14.5	-13.8	-11.7	-10.9	-10.4
Memorandum items;
Official current transfers			0.0	0.0	0.0	0.0	0.0	0.0	0.5	0.5	0.5	0.5	0.5
Official capital transfers ^3/			4.5	4.5	4.4	4.5	4.4	10.1	10.2	7.9	7.6	7.4	6.9
GDP at current market prices
In billions of Burundi Francs			5,560	6,191	5,911	6,657	6,613	7,416	8,305	9,316	10,457	11,620	12,868
In billions of US$			3.0	3.2	3.1	3.4	3.4	3.6	4.0	4.3	4.7	5.1	5.5
Gross international reserves
	In millions of US$		113.4	1134	94.3	113.4	266.6	263.3	243.7	223.6	227.1	224.3	222.3
	In months of next year imports		1.3	11	1.0	1.1	2.2	2.1	1.9	1.7	1.7	1.6	1.5
GDP per capita (Nominal US$)			261.3	273.0	259.9	275.8	274.0	289.3	305.4	322.9	341.7	357.9	373.6
Export volume growth (goods, in percent)			-4.7	-07	-21.6	2.7	-17.9	63.7	0.1	4.3	9.3	4.2	4.3
Import volume growth (goods, in percent)			44.5	0.5	-16.1	2.2	-3.8	14.1	6.0	4.5	0.4	2.3	2.3
Population (million)			11.5	11 9	11.9	12.2	12.2	12.6	13.0	13.4	13.8	14.2	14.6
Health and social spending ^2/
	Health		1.6	2.9	1.9	1.7	3.6	3.3		...	...	...	...
	Social		2.5	2.9	3.0	3.2	3.2	3.1	...	...	...	...	...
Human Development Index Score (HDI/UNDP)			0.4	...	...	...	...	...	...	...	...	...	...

Sources; Burundi authorities; and IMF staff estimates and projections,

^{^2/}Fiscal year values (July-June) starting in 201 & (i.e. 201 & is FV 2018/19), Includes Covid-related fiscal measures starting in FV2020/21.

^{Table 2a.}

Burundi: Central Government Operations, 2019–27^¹

(BIF billion)

Sources: Burundi authorities; and IMF staff estimates and projections.

^{^1/}Fiscal year values (July-June). Includes Covid-related fiscal measures starting in FY2020/21.

^{^2/}Sale of fixed capital assets included in nontax revenue rather than under expenditure.

^{^3/}Starting with FY2022/23, grants includes project grants from the US and the EU. Grants averaged 17.7 percent of GDP per year during 2010–14, before the 2015 political crisis. Projected World Bank grants account for most of projected grants during 2022–23 and about half of the grants during 2024–27. No World Bank grant is assumed after 2027.

^{^4/}Includes the grant for the IMF debt service falling due from October 16, 2021 to April 13, 2022, which is subject to the availability of resources under the CCRT.

^{^5/}Includes unforeseen spending and spending not properly classified due to lack of proper reconciliation between the Ministry in charge of Finance and the Central Bank. Covid spending envisaged in the FY2021/22 budget (BIF 70.4 billion or 1.07 percent of GDP) is not itemized in the budget but is included in some current and investment spending lines such as transfers to hospitals.

^{^6/}The strong increase in investment during FY2022/23 is due to a jump in domestic investment financed with part of the SDR allocation and project financing as per footnote 3.

^{^7/}A negative sign denotes a reduction of financial assets.

^{^8/}Staff projects that the central bank will on-lend in local currency to the government the equivalent of half of the SDR allocation in FY2022/23 (2.6 percent of GDP) and the remainder in FY2023/24 and FY2024/25.

^{Table 2a.}

Burundi: Central Government Operations, 2019–27^¹

(BIF billion)

					2019/20	2020/21		2021/22		2022/23	2023/24	2024/25	2025/26	2026/27
					Est.	Budget	Est.	Budget	Proj.	Proj.
Revenue and grants					1,270.4	1,404.8	1,452.7	1,544.1	1,672.7	2,303.5	2,547.3	2,736.0	3,033.0	3,327.2
	Tax revenue				921.5	961.9	1,044.4	1,081.8	1,174.7	1,373.0	1,531.5	1,723.5	1,931.1	2,148.1
			Taxes on income, profits, and capital gains		231.8	229.0	244.7	256.3	278.8	311.4	350.4	397.2	447.9	501.8
			Taxes on goods & services		591.7	632.3	658.4	714.0	750.3	864.3	976.4	1,097.9	1,228.3	1,365.1
			Taxes on international trade & transactions		98.0	100.6	141.4	111.5	145.6	197.2	204.6	228.5	254.9	281.2
	Other revenue ^2/				102.6	111.8	115.5	125.3	145.8	158.8	180.7	202.8	226.5	251.2
	Grants ^3/				246.3	331.2	292.7	336.9	352.3	771.7	835.0	809.6	875.4	928.0
			Program grants		0.0	0.0	0.0	0.0	0.0	0.0	44.1	49.4	55.2	61.2
			Project grants ^3/		246.3	328.2	264.5	333.9	320.2	768.6	787.8	757.0	817.0	863.5
			Other grants and transfers ^4/		0.0	3.0	28.2	3.0	32.1	3.1	3.1	3.2	3.2	3.2
Total expenditure					1,614.9	1,577.2	1,943.5	1,695.9	2,022.3	2,886.2	3,089.4	3,100.7	3,315.4	3,612.9
	Expense				1,163.7	965.8	1,453.1	1,022.2	1,367.3	1,550.7	1,697.0	1,839.0	2,032.9	2,239.4
			Compensation of employees		458.1	465.5	485.1	499.7	509.1	588.0	687.2	771.2	861.0	955.0
			Purchases/use of goods & services		182.1	138.9	179.2	129.7	151.2	179.0	202.6	227.4	253.9	281.6
			Subsidies and Social benefits		288.8	280.6	419.3	309.2	344.9	367.0	405.3	454.8	507.8	563.2
			Interest		164.0	59.2	178.1	62.5	224.1	259.6	280.1	306.3	327.8	348.3
				Of which: Domestic	157.4	46.0	170.3	47.9	209.3	244.6	264.6	290.1	310.9	330.6
			Other expense ^5/		70.8	21.6	191.4	21.1	138.1	157.0	121.7	79.4	82.3	91.2
				Of which: Covid spending ^5/	0.0	0.0	68.8	…	102.2	52.0	26.2	0.0	0.0	0.0
	Net acquisition of nonfinancial assets ^6/				451.2	611.4	490.4	673.6	654.9	1,335.5	1,392.5	1,261.7	1,282.5	1,373.5
			Of which: Domestically financed		150.4	234.0	205.6	289.4	283.8	525.7	547.0	427.8	386.4	428.5
Net lending (+) / borrowing (-)					-344.6	-172.4	-490.8	-151.8	-349.5	-582.7	-542.1	-364.7	-282.4	-285.7
Net acquisition of financial assets ^7/					68.7	0.0	180.1	0.0	117.0	127.4	128.4	19.9	-77.3	22.3
		Deposits			12.8	0.0	151.2	0.0	147.2	151.2	128.4	19.9	-77.3	22.3
		Net lending			56.0	0.0	28.9	0.0	-30.2	-23.9	0.0	0.0	0.0	0.0
		Shares and other equity			0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Net incurrence of liabilities					413.3	172.4	670.9	151.8	466.5	710.1	670.5	384.6	205.2	308.0
	Domestic				257.1	138.9	478.4	138.3	378.8	676.9	651.4	373.7	199.4	303.0
			Commercial banks		283.3	91.9	215.6	91.3	364.4	356.5	378.9	144.8	86.5	190.1
			Non-banks		3.2	47.0	95.5	47.0	70.5	112.6	112.9	112.9	112.9	112.8
			Central Bank (net) ^8/		-29.4	0.0	167.4	0.0	-56.1	207.9	159.6	116.0	0.0	0.0
	Foreign				34.4	33.5	22.3	13.5	342.5	33.2	19.1	11.0	5.8	5.1
	Accounts Payable				121.7	0.0	170.2	0.0	-254.8	0.0	0.0	0.0	0.0	0.0
Memorandum items:
Domestic primary balance					-180.6	-113.2	-312.7	-89.3	-125.5	-323.1	-262.0	-58.4	45.4	62.6
GDP at current market prices (BIF billion)					5,735	6,262	6,262	7,014	7,014	7,860	8,811	9,887	11,039	12,244

Sources: Burundi authorities; and IMF staff estimates and projections.

^{^1/}Fiscal year values (July-June). Includes Covid-related fiscal measures starting in FY2020/21.

^{^2/}Sale of fixed capital assets included in nontax revenue rather than under expenditure.

^{^4/}Includes the grant for the IMF debt service falling due from October 16, 2021 to April 13, 2022, which is subject to the availability of resources under the CCRT.

^{^6/}The strong increase in investment during FY2022/23 is due to a jump in domestic investment financed with part of the SDR allocation and project financing as per footnote 3.

^{^7/}A negative sign denotes a reduction of financial assets.

^{Table 2a.}

Burundi: Central Government Operations, 2019–27^¹

(BIF billion)

					2019/20	2020/21		2021/22		2022/23	2023/24	2024/25	2025/26	2026/27
					Est.	Budget	Est.	Budget	Proj.	Proj.
Revenue and grants					1,270.4	1,404.8	1,452.7	1,544.1	1,672.7	2,303.5	2,547.3	2,736.0	3,033.0	3,327.2
	Tax revenue				921.5	961.9	1,044.4	1,081.8	1,174.7	1,373.0	1,531.5	1,723.5	1,931.1	2,148.1
			Taxes on income, profits, and capital gains		231.8	229.0	244.7	256.3	278.8	311.4	350.4	397.2	447.9	501.8
			Taxes on goods & services		591.7	632.3	658.4	714.0	750.3	864.3	976.4	1,097.9	1,228.3	1,365.1
			Taxes on international trade & transactions		98.0	100.6	141.4	111.5	145.6	197.2	204.6	228.5	254.9	281.2
	Other revenue ^2/				102.6	111.8	115.5	125.3	145.8	158.8	180.7	202.8	226.5	251.2
	Grants ^3/				246.3	331.2	292.7	336.9	352.3	771.7	835.0	809.6	875.4	928.0
			Program grants		0.0	0.0	0.0	0.0	0.0	0.0	44.1	49.4	55.2	61.2
			Project grants ^3/		246.3	328.2	264.5	333.9	320.2	768.6	787.8	757.0	817.0	863.5
			Other grants and transfers ^4/		0.0	3.0	28.2	3.0	32.1	3.1	3.1	3.2	3.2	3.2
Total expenditure					1,614.9	1,577.2	1,943.5	1,695.9	2,022.3	2,886.2	3,089.4	3,100.7	3,315.4	3,612.9
	Expense				1,163.7	965.8	1,453.1	1,022.2	1,367.3	1,550.7	1,697.0	1,839.0	2,032.9	2,239.4
			Compensation of employees		458.1	465.5	485.1	499.7	509.1	588.0	687.2	771.2	861.0	955.0
			Purchases/use of goods & services		182.1	138.9	179.2	129.7	151.2	179.0	202.6	227.4	253.9	281.6
			Subsidies and Social benefits		288.8	280.6	419.3	309.2	344.9	367.0	405.3	454.8	507.8	563.2
			Interest		164.0	59.2	178.1	62.5	224.1	259.6	280.1	306.3	327.8	348.3
				Of which: Domestic	157.4	46.0	170.3	47.9	209.3	244.6	264.6	290.1	310.9	330.6
			Other expense ^5/		70.8	21.6	191.4	21.1	138.1	157.0	121.7	79.4	82.3	91.2
				Of which: Covid spending ^5/	0.0	0.0	68.8	…	102.2	52.0	26.2	0.0	0.0	0.0
	Net acquisition of nonfinancial assets ^6/				451.2	611.4	490.4	673.6	654.9	1,335.5	1,392.5	1,261.7	1,282.5	1,373.5
			Of which: Domestically financed		150.4	234.0	205.6	289.4	283.8	525.7	547.0	427.8	386.4	428.5
Net lending (+) / borrowing (-)					-344.6	-172.4	-490.8	-151.8	-349.5	-582.7	-542.1	-364.7	-282.4	-285.7
Net acquisition of financial assets ^7/					68.7	0.0	180.1	0.0	117.0	127.4	128.4	19.9	-77.3	22.3
		Deposits			12.8	0.0	151.2	0.0	147.2	151.2	128.4	19.9	-77.3	22.3
		Net lending			56.0	0.0	28.9	0.0	-30.2	-23.9	0.0	0.0	0.0	0.0
		Shares and other equity			0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Net incurrence of liabilities					413.3	172.4	670.9	151.8	466.5	710.1	670.5	384.6	205.2	308.0
	Domestic				257.1	138.9	478.4	138.3	378.8	676.9	651.4	373.7	199.4	303.0
			Commercial banks		283.3	91.9	215.6	91.3	364.4	356.5	378.9	144.8	86.5	190.1
			Non-banks		3.2	47.0	95.5	47.0	70.5	112.6	112.9	112.9	112.9	112.8
			Central Bank (net) ^8/		-29.4	0.0	167.4	0.0	-56.1	207.9	159.6	116.0	0.0	0.0
	Foreign				34.4	33.5	22.3	13.5	342.5	33.2	19.1	11.0	5.8	5.1
	Accounts Payable				121.7	0.0	170.2	0.0	-254.8	0.0	0.0	0.0	0.0	0.0
Memorandum items:
Domestic primary balance					-180.6	-113.2	-312.7	-89.3	-125.5	-323.1	-262.0	-58.4	45.4	62.6
GDP at current market prices (BIF billion)					5,735	6,262	6,262	7,014	7,014	7,860	8,811	9,887	11,039	12,244

Sources: Burundi authorities; and IMF staff estimates and projections.

^{^1/}Fiscal year values (July-June). Includes Covid-related fiscal measures starting in FY2020/21.

^{^2/}Sale of fixed capital assets included in nontax revenue rather than under expenditure.

^{^4/}Includes the grant for the IMF debt service falling due from October 16, 2021 to April 13, 2022, which is subject to the availability of resources under the CCRT.

^{^6/}The strong increase in investment during FY2022/23 is due to a jump in domestic investment financed with part of the SDR allocation and project financing as per footnote 3.

^{^7/}A negative sign denotes a reduction of financial assets.

^{Table 2b.}

Burundi: Central Government Operations, 2019–27^¹

(Percent of GDP)

Sources: Burundi authorities; and IMF staff estimates and projections.

^{^1/}Fiscal year values (July-June). Includes Covid-related fiscal measures starting in FY2020/21.

^{^2/}Sale of fixed capital assets included in nontax revenue rather than under expenditure.

^{^4/}Includes the grant for the IMF debt service falling due from October 16, 2021 to April 13, 2022, which is subject to the availability of resources under the CCRT.

^{^5/}Includes unforeseen spending and spending not properly classified due to lack of proper reconciliation between the Ministry in charge of Finance and the Central Bank. Covid spending envisaged in the FY2021/22 budget (BIF 70.4 billion or about 1 percent of GDP) is not itemized in the budget but is included in some current and investment spending lines such as transfers to hospitals.

^{^6/}The strong increase in investment during FY2022/23 is due to a jump in domestic investment financed with part of the SDR allocation and project financing as per footnote 3.

^{^7/}A negative sign denotes a reduction of financial assets.

^{Table 2b.}

Burundi: Central Government Operations, 2019–27^¹

(Percent of GDP)

				2019/20	2020/21		2021/22		2022/23	2023/24	2024/25	2025/26	2026/27
				Est.	Budget	Est.	Budget	Proj.	Proj.
Revenue and grants				22.2	22.4	23.2	22.0	23.8	29.3	28.9	27.7	27.5	27.2
	Tax revenue			16.1	15.4	16.7	15.4	16.7	17.5	17.4	17.4	17.5	17.5
			Taxes on income, profits, and capital gains	4.0	3.7	3.9	3.7	4.0	4.0	4.0	4.0	4.1	4.1
			Taxes on goods & services	10.3	10.1	10.5	10.2	10.7	11.0	11.1	11.1	11.1	11.1
			Taxes on international trade & transactions	1.7	1.6	2.3	1.6	2.1	2.5	2.3	2.3	2.3	2.3
	Nontax revenue ^2/			1.8	1.8	1.8	18	2.1	2.0	2.1	2.1	2.1	2.1
	Grants ^3/			4.3	5.3	4.7	4.8	5.0	9.8	9.5	8.2	7.9	7.6
			Program grants	0.0	0.0	0.0	0.0	0.0	0.0	0.5	0.5	0.5	0.5
			Project grants ^3/	4.3	5.2	4.2	4.8	4.6	9.8	8.9	7.7	7.4	7.1
			Other grants and transfers ^4/	0.0	0.0	0.5	0.0	0.5	0.0	0.0	0.0	0.0	0.0
Total expenditure				28.2	25.2	31.0	24.2	28.8	36.7	35.1	31.4	30.0	29.5
	Expense			20.3	15.4	23.2	14.6	19.5	19.7	19.3	18.6	18.4	18.3
			Compensation of employees	8.0	7.4	7.7	7.1	7.3	7.5	7.8	7.8	7.8	7.8
			Purchases/use of goods & sen/ices	3.2	2.2	2.9	1.8	2.2	2.3	2.3	2.3	2.3	2.3
			Subsidies and Social benefits	5.0	4.5	6.7	4.4	4.9	4.7	4.6	4.6	4.6	4.6
			Interest	2.9	0.9	2.8	0.9	3.2	3.3	3.2	3.1	3.0	2.8
			Of which; Domestic	2.7	0.7	2.7	0.7	3.0	3.1	3.0	2.9	2.S	2.7
			Other expense ^5/	1.2	0.3	3.1	0.3	2.0	2.0	1.4	0.8	0.7	0.7
			Of which; Covid spending ^5/	0.0	0.0	1.1	...	1.5	0.7	0.3	0.0	0.0	0.0
	Net acquisition of nonfinancial assets ^6/			7.9	9.8	7.3	9.6	9.3	17.0	15.8	12.8	11.6	11.2
			Of which: Domestically financed	2.6	3.7	3.3	4.1	4.0	6.7	6.2	4.3	3.5	3.5
Net lending C+) / borrowing (-)				-6.0	-2.8	-7.8	-2.2	-5.0	-7.4	-6.2	-3.7	-2.6	-2.3
Net acquisition of financial assets ^7/				1.2	0.0	2.9	0.0	1.7	1.6	1.5	0.2	-0.7	0.2
		Deposits		0.2	0.0	2.4	0.0	2.1	1.9	1.5	0.2	-0.7	0.2
		Net lending		1.0	0.0	0.5	0.0	-0.4	-0.3	0.0	0.0	0.0	0.0
		Shares and other equity		0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Net incurrence of liabilities				7.2	2.8	10.7	2.2	6.7	9.0	7.6	3.9	1.9	2.5
	Domestic			4.5	2.2	7.6	2.0	5.4	8.6	7.4	3.8	1.8	2.5
			Commercial banks	4.9	1.5	3.4	1.3	5.2	4.5	4.3	1.5	0.8	1.6
			Non-banks	0.1	0.8	1.5	0.7	1.0	1.4	1.3	1.1	1.0	0.9
			Central Bank (net) ^8/	-0.5	0.0	2.7	0.0	-0.8	2.6	1.8	1.2	0.0	0.0
	Foreign			0.6	0.5	0.4	0.2	4.9	0.4	0.2	0.1	0.1	0.0
	Accounts payable			2.1	0.0	2.7	0.0	-3.6	0.0	0.0	0.0	0.0	0.0
Memorandum items;
Domestic primary balance				-3.1	-1.8	-5.0	-1.3	-1.8	-4.1	-3.0	-0.6	0.4	0.5
GDP at current market prices (BIF billion)				5,735	6,262	6,262	7,014	7,014	7,860	8,811	9,887	11,039	12,244.0

Sources: Burundi authorities; and IMF staff estimates and projections.

^{^1/}Fiscal year values (July-June). Includes Covid-related fiscal measures starting in FY2020/21.

^{^2/}Sale of fixed capital assets included in nontax revenue rather than under expenditure.

^{^4/}Includes the grant for the IMF debt service falling due from October 16, 2021 to April 13, 2022, which is subject to the availability of resources under the CCRT.

^{^5/}Includes unforeseen spending and spending not properly classified due to lack of proper reconciliation between the Ministry in charge of Finance and the Central Bank. Covid spending envisaged in the FY2021/22 budget (BIF 70.4 billion or about 1 percent of GDP) is not itemized in the budget but is included in some current and investment spending lines such as transfers to hospitals.

^{^6/}The strong increase in investment during FY2022/23 is due to a jump in domestic investment financed with part of the SDR allocation and project financing as per footnote 3.

^{^7/}A negative sign denotes a reduction of financial assets.

^{Table 2b.}

Burundi: Central Government Operations, 2019–27^¹

(Percent of GDP)

				2019/20	2020/21		2021/22		2022/23	2023/24	2024/25	2025/26	2026/27
				Est.	Budget	Est.	Budget	Proj.	Proj.
Revenue and grants				22.2	22.4	23.2	22.0	23.8	29.3	28.9	27.7	27.5	27.2
	Tax revenue			16.1	15.4	16.7	15.4	16.7	17.5	17.4	17.4	17.5	17.5
			Taxes on income, profits, and capital gains	4.0	3.7	3.9	3.7	4.0	4.0	4.0	4.0	4.1	4.1
			Taxes on goods & services	10.3	10.1	10.5	10.2	10.7	11.0	11.1	11.1	11.1	11.1
			Taxes on international trade & transactions	1.7	1.6	2.3	1.6	2.1	2.5	2.3	2.3	2.3	2.3
	Nontax revenue ^2/			1.8	1.8	1.8	18	2.1	2.0	2.1	2.1	2.1	2.1
	Grants ^3/			4.3	5.3	4.7	4.8	5.0	9.8	9.5	8.2	7.9	7.6
			Program grants	0.0	0.0	0.0	0.0	0.0	0.0	0.5	0.5	0.5	0.5
			Project grants ^3/	4.3	5.2	4.2	4.8	4.6	9.8	8.9	7.7	7.4	7.1
			Other grants and transfers ^4/	0.0	0.0	0.5	0.0	0.5	0.0	0.0	0.0	0.0	0.0
Total expenditure				28.2	25.2	31.0	24.2	28.8	36.7	35.1	31.4	30.0	29.5
	Expense			20.3	15.4	23.2	14.6	19.5	19.7	19.3	18.6	18.4	18.3
			Compensation of employees	8.0	7.4	7.7	7.1	7.3	7.5	7.8	7.8	7.8	7.8
			Purchases/use of goods & sen/ices	3.2	2.2	2.9	1.8	2.2	2.3	2.3	2.3	2.3	2.3
			Subsidies and Social benefits	5.0	4.5	6.7	4.4	4.9	4.7	4.6	4.6	4.6	4.6
			Interest	2.9	0.9	2.8	0.9	3.2	3.3	3.2	3.1	3.0	2.8
			Of which; Domestic	2.7	0.7	2.7	0.7	3.0	3.1	3.0	2.9	2.S	2.7
			Other expense ^5/	1.2	0.3	3.1	0.3	2.0	2.0	1.4	0.8	0.7	0.7
			Of which; Covid spending ^5/	0.0	0.0	1.1	...	1.5	0.7	0.3	0.0	0.0	0.0
	Net acquisition of nonfinancial assets ^6/			7.9	9.8	7.3	9.6	9.3	17.0	15.8	12.8	11.6	11.2
			Of which: Domestically financed	2.6	3.7	3.3	4.1	4.0	6.7	6.2	4.3	3.5	3.5
Net lending C+) / borrowing (-)				-6.0	-2.8	-7.8	-2.2	-5.0	-7.4	-6.2	-3.7	-2.6	-2.3
Net acquisition of financial assets ^7/				1.2	0.0	2.9	0.0	1.7	1.6	1.5	0.2	-0.7	0.2
		Deposits		0.2	0.0	2.4	0.0	2.1	1.9	1.5	0.2	-0.7	0.2
		Net lending		1.0	0.0	0.5	0.0	-0.4	-0.3	0.0	0.0	0.0	0.0
		Shares and other equity		0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Net incurrence of liabilities				7.2	2.8	10.7	2.2	6.7	9.0	7.6	3.9	1.9	2.5
	Domestic			4.5	2.2	7.6	2.0	5.4	8.6	7.4	3.8	1.8	2.5
			Commercial banks	4.9	1.5	3.4	1.3	5.2	4.5	4.3	1.5	0.8	1.6
			Non-banks	0.1	0.8	1.5	0.7	1.0	1.4	1.3	1.1	1.0	0.9
			Central Bank (net) ^8/	-0.5	0.0	2.7	0.0	-0.8	2.6	1.8	1.2	0.0	0.0
	Foreign			0.6	0.5	0.4	0.2	4.9	0.4	0.2	0.1	0.1	0.0
	Accounts payable			2.1	0.0	2.7	0.0	-3.6	0.0	0.0	0.0	0.0	0.0
Memorandum items;
Domestic primary balance				-3.1	-1.8	-5.0	-1.3	-1.8	-4.1	-3.0	-0.6	0.4	0.5
GDP at current market prices (BIF billion)				5,735	6,262	6,262	7,014	7,014	7,860	8,811	9,887	11,039	12,244.0

Sources: Burundi authorities; and IMF staff estimates and projections.

^{^1/}Fiscal year values (July-June). Includes Covid-related fiscal measures starting in FY2020/21.

^{^2/}Sale of fixed capital assets included in nontax revenue rather than under expenditure.

^{^4/}Includes the grant for the IMF debt service falling due from October 16, 2021 to April 13, 2022, which is subject to the availability of resources under the CCRT.

^{^5/}Includes unforeseen spending and spending not properly classified due to lack of proper reconciliation between the Ministry in charge of Finance and the Central Bank. Covid spending envisaged in the FY2021/22 budget (BIF 70.4 billion or about 1 percent of GDP) is not itemized in the budget but is included in some current and investment spending lines such as transfers to hospitals.

^{^6/}The strong increase in investment during FY2022/23 is due to a jump in domestic investment financed with part of the SDR allocation and project financing as per footnote 3.

^{^7/}A negative sign denotes a reduction of financial assets.

^{Table 3.}

Burundi: Monetary Survey, 2019–27

(BIF billion)

Sources: Burundi authorities; IMF staff estimates and projections.

^{Table 3.}

Burundi: Monetary Survey, 2019–27

(BIF billion)

					2019	2020		2021		2022	2023	2024	2025	2026	2027
					Est.	Pre-Covid	Est.	Pre-Covid	Proj.	Proj.
Net foreign assets					-206.3	-117.1	-205.0	-101.4	-322.4	-342.S	-430.5	-526.6	-576.6	-640.7	-706.0
	Central bank				-129.4	-32.4	-93.1	-8.3	-141.3	-167.2	-237.3	-314.1	-342.9	-333.6	-423.2
	Deposit money banks				-76.9	-84.6	-111.9	-93.1	-1810	-175.6	-193.1	-212.5	-233.7	-257.1	-232.3
Net domestic assets					2,409.2	2,567.5	2,938.9	3,016.6	3,666.5	4,240.0	4,940.9	5,760.5	6,657.0	7,641.2	3,743.1
	Domestic credit				2,523.4	2,867.8	3,655.0	3,272.3	4,297.3	5,143.5	6,242.4	7,330.6	8,041.2	3,360.2	9,753.3
		Net claims on the government			1,618.9	1,931.2	2,025.8	2,268.4	1,932.4	2,300.4	2,875.2	3,369.3	3,366.3	3,551.7	3,746.0
			Central bank		324.8	382,7	410,6	400,0	152,2	254,0	360,1	578,7	578,7	573,7	573,7
			Commercial banks		1,279.7	1,545.5	1,598.6	1,868.3	1,764.6	2,046.4	2,515.1	2,790.6	2,787.7	2,973.0	3,167.4
		Credit to the economy			904.5	936,6	1,629.3	1,004.0	2,364.8	2,343.1	3,367.2	3,961.4	4,674.9	5,303.5	6,007.3
				Credit to the private sector ^1/	862.4	899,1	1,606.9	966,4	2,327.3	2,807.6	3,333.2	3,929.6	4,639.2	5,274.3	5,973.4
				Credit to public enterprises	42.1	37.6	22.3	37.6	37.5	35.5	34.0	31.8	35.7	33.7	33.3
	Other items, net (assets = +)				-114.3	-300.3	-716.2	-255.7	-630.8	-903.5	-1,301.4	-1,570.2	-1,334.2	-1,219.0	-1,010.2
M3					2,202.8	2,450.4	2,733.8	2,915.2	3,344.1	3,897.2	4,510.5	5,233.9	6,030.4	7,000.5	3,037.1
	Foreign currency deposits				188.1	206.9	207.3	227.6	254.7	247.0	271.7	299.9	330.3	364.7	401.9
	M2				2,014.7	2,243.5	2,526.5	2,687.7	3,089.4	3,650.2	4,238.7	4,934.0	5,749.6	6,635.3	7,635.2
		Currency in circulation			360.0	387.0	433.3	416.1	473.8	588.9	659.5	739.8	330.4	922.3	1.021.3
		Local currency deposits			1,654.8	1,656.6	2,093.2	2,271.6	2,615.6	3,061.3	3,579.2	4,194.2	4,919.2	5,713.1	6,613.4
				Demand deposits	1,070.1	995,0	1,359.8	1,059.0	1,625.2	1,820.4	2,036.5	2,283.3	2,561.6	2,345.3	3,149.4
				Quasi-money	584.6	861.6	723.4	1,202.5	990.3	1,240.8	1,542.7	1,910.9	2,357.6	2,367.3	3,464.0
					Change as a percentage of beginning period M2
Net foreign assets
	Central bank				2.2	4.3	1.4	0.9	0.1	2.7	-4.0	-2.0	-1.0	-0.3	-0.43
	Deposit money banks				-2.4	-0.4	-1.7	-0.4	-2.7	0.2	-0.5	-0.5	-0.4	-0.4	-0.4
Net domestic assets					25.1	17.1	26.3	20.0	28.8	18.6	19.2	19.3	13.2	17.1	16.6
	Domestic credit				24.1	20.1	56.2	18.0	25.4	27.4	30.1	25.7	14.4	14.2	13.5
		Net claims on the government			17.2	16.8	20.2	15.0	-3.7	11.9	15.7	11.7	-0.1	3.2	2.9
		Credit to the economy			6.9	3.3	36.0	3.0	29.1	15.5	14.4	14.0	14.5	11.0	10.5
	Other items, net (assets = +)				1.0	-3.0	-29.9	2.0	3.4	-8.8	-10.9	-6.3	3.3	2.9	3.1
M3					24.9	21.9	26.4	20.7	24.2	17.9	16.8	17.1	17.2	16.0	15.6
	Foreign currency deposits				1.0	1.0	1.0	0.9	1.9	-0.2	0.7	0.7	0.6	0.6	0.6
	M2				23.9	20.9	25.4	19.8	22.3	18.2	16.1	16.4	16.5	15.4	15.1
		Currency in circulation			4.0	1.5	3.6	1.3	1.6	3.7	1.9	1.9	1.3	1.6	1.5
		Local currency deposits			20.0	19.4	21.8	18.5	20.7	14.4	14.2	14.5	14.7	13.3	13.6
				Demand deposits	9.6	3.8	14.9	3.3	10.1	6.3	5.9	5.8	5.6	4.9	4.6
				Quasi-money	10.4	15.5	6.9	15.2	10.6	8.1	8.3	8.7	9.1	3.9	9.0
Memorandum items;
Credit to the private sector (percent GDP)					15.5	14.5	27.2	14.5	35.2	37.9	40.1	42.2	44.4	45.4	46.4
Official exchange rate (BF/$)					1,882	...	1,946	...	2,006	....	...	...	...	...	...
Parallel exchange rate (BF/$)					2920	...	3,195	...	3,378	...	...	...	...	...	...

Sources: Burundi authorities; IMF staff estimates and projections.

^{Table 3.}

Burundi: Monetary Survey, 2019–27

(BIF billion)

					2019	2020		2021		2022	2023	2024	2025	2026	2027
					Est.	Pre-Covid	Est.	Pre-Covid	Proj.	Proj.
Net foreign assets					-206.3	-117.1	-205.0	-101.4	-322.4	-342.S	-430.5	-526.6	-576.6	-640.7	-706.0
	Central bank				-129.4	-32.4	-93.1	-8.3	-141.3	-167.2	-237.3	-314.1	-342.9	-333.6	-423.2
	Deposit money banks				-76.9	-84.6	-111.9	-93.1	-1810	-175.6	-193.1	-212.5	-233.7	-257.1	-232.3
Net domestic assets					2,409.2	2,567.5	2,938.9	3,016.6	3,666.5	4,240.0	4,940.9	5,760.5	6,657.0	7,641.2	3,743.1
	Domestic credit				2,523.4	2,867.8	3,655.0	3,272.3	4,297.3	5,143.5	6,242.4	7,330.6	8,041.2	3,360.2	9,753.3
		Net claims on the government			1,618.9	1,931.2	2,025.8	2,268.4	1,932.4	2,300.4	2,875.2	3,369.3	3,366.3	3,551.7	3,746.0
			Central bank		324.8	382,7	410,6	400,0	152,2	254,0	360,1	578,7	578,7	573,7	573,7
			Commercial banks		1,279.7	1,545.5	1,598.6	1,868.3	1,764.6	2,046.4	2,515.1	2,790.6	2,787.7	2,973.0	3,167.4
		Credit to the economy			904.5	936,6	1,629.3	1,004.0	2,364.8	2,343.1	3,367.2	3,961.4	4,674.9	5,303.5	6,007.3
				Credit to the private sector ^1/	862.4	899,1	1,606.9	966,4	2,327.3	2,807.6	3,333.2	3,929.6	4,639.2	5,274.3	5,973.4
				Credit to public enterprises	42.1	37.6	22.3	37.6	37.5	35.5	34.0	31.8	35.7	33.7	33.3
	Other items, net (assets = +)				-114.3	-300.3	-716.2	-255.7	-630.8	-903.5	-1,301.4	-1,570.2	-1,334.2	-1,219.0	-1,010.2
M3					2,202.8	2,450.4	2,733.8	2,915.2	3,344.1	3,897.2	4,510.5	5,233.9	6,030.4	7,000.5	3,037.1
	Foreign currency deposits				188.1	206.9	207.3	227.6	254.7	247.0	271.7	299.9	330.3	364.7	401.9
	M2				2,014.7	2,243.5	2,526.5	2,687.7	3,089.4	3,650.2	4,238.7	4,934.0	5,749.6	6,635.3	7,635.2
		Currency in circulation			360.0	387.0	433.3	416.1	473.8	588.9	659.5	739.8	330.4	922.3	1.021.3
		Local currency deposits			1,654.8	1,656.6	2,093.2	2,271.6	2,615.6	3,061.3	3,579.2	4,194.2	4,919.2	5,713.1	6,613.4
				Demand deposits	1,070.1	995,0	1,359.8	1,059.0	1,625.2	1,820.4	2,036.5	2,283.3	2,561.6	2,345.3	3,149.4
				Quasi-money	584.6	861.6	723.4	1,202.5	990.3	1,240.8	1,542.7	1,910.9	2,357.6	2,367.3	3,464.0
					Change as a percentage of beginning period M2
Net foreign assets
	Central bank				2.2	4.3	1.4	0.9	0.1	2.7	-4.0	-2.0	-1.0	-0.3	-0.43
	Deposit money banks				-2.4	-0.4	-1.7	-0.4	-2.7	0.2	-0.5	-0.5	-0.4	-0.4	-0.4
Net domestic assets					25.1	17.1	26.3	20.0	28.8	18.6	19.2	19.3	13.2	17.1	16.6
	Domestic credit				24.1	20.1	56.2	18.0	25.4	27.4	30.1	25.7	14.4	14.2	13.5
		Net claims on the government			17.2	16.8	20.2	15.0	-3.7	11.9	15.7	11.7	-0.1	3.2	2.9
		Credit to the economy			6.9	3.3	36.0	3.0	29.1	15.5	14.4	14.0	14.5	11.0	10.5
	Other items, net (assets = +)				1.0	-3.0	-29.9	2.0	3.4	-8.8	-10.9	-6.3	3.3	2.9	3.1
M3					24.9	21.9	26.4	20.7	24.2	17.9	16.8	17.1	17.2	16.0	15.6
	Foreign currency deposits				1.0	1.0	1.0	0.9	1.9	-0.2	0.7	0.7	0.6	0.6	0.6
	M2				23.9	20.9	25.4	19.8	22.3	18.2	16.1	16.4	16.5	15.4	15.1
		Currency in circulation			4.0	1.5	3.6	1.3	1.6	3.7	1.9	1.9	1.3	1.6	1.5
		Local currency deposits			20.0	19.4	21.8	18.5	20.7	14.4	14.2	14.5	14.7	13.3	13.6
				Demand deposits	9.6	3.8	14.9	3.3	10.1	6.3	5.9	5.8	5.6	4.9	4.6
				Quasi-money	10.4	15.5	6.9	15.2	10.6	8.1	8.3	8.7	9.1	3.9	9.0
Memorandum items;
Credit to the private sector (percent GDP)					15.5	14.5	27.2	14.5	35.2	37.9	40.1	42.2	44.4	45.4	46.4
Official exchange rate (BF/$)					1,882	...	1,946	...	2,006	....	...	...	...	...	...
Parallel exchange rate (BF/$)					2920	...	3,195	...	3,378	...	...	...	...	...	...

Sources: Burundi authorities; IMF staff estimates and projections.

^{Table 4.}

Burundi: Central Bank Accounts, 2019–27

(BIF billion)

Sources: Burundi authorities; IMF staff estimates and projections.

^{^1/}Projections assuming that the unidentified BOP financing is filled.

^{Table 4.}

Burundi: Central Bank Accounts, 2019–27

(BIF billion)

				2019	2020	2021	2022	2023	2024	2025	2026	2027
				Est.			Proj.
	Net foreign assets			-129.4	-93.1	-141.3	-167.2	-237.3	-314.1	-342.9	-383.6	-423.2
		Assets		241.8	250.9	593.2	612.0	588.6	562.1	587.0	597.9	611.0
		Liabilities		371.2	344.0	734.6	779.2	825.9	876.2	929.8	981.5	1034.2
	Net domestic assets			963.5	1115.5	1308.2	1531.2	1762.6	2022.9	2258.8	2510.7	2776.6
		Domestic credit		349.5	439.2	182.2	283.9	390.0	608.6	608.6	608.6	608.6
			Net claims on the government	324.8	410.6	152.2	254.0	360.1	578.7	578.7	578.7	578.7
			Other credit to the economy	24.7	28.6	29.9	29.9	29.9	29.9	29.9	29.9	29.9
		Other items, net (assets = +)		614.0	676.3	1126.1	1247.3	1372.6	1414.3	1650.2	1902.1	2168.0
	Reserve money			834.1	1022.4	1166.9	1364.0	1525.3	1708.8	1916.0	2127.0	2353.4
		Currency in circulation		360.0	433.3	473.8	588.9	659.5	739.8	830.4	922.8	1021.8
		Bank reserves		418.4	524.2	618.1	693.1	776.2	870.7	977.4	1086.1	1202.6
		Cash in vault		44.3	65.8	86.1	99.2	115.5	134.8	157.4	182.2	210.2
		Other nonbank deposits		11.5	14.1	18.0	18.0	18.0	18.0	18.0	18.0	18.0
Memorandum items:
	Net foreign assets of BRB (US$ million)
		Assets ^1/		118.8	131.0	326.9	386.8	316.2	284.5	274.8	280.1	288.5
		Liabilities		197.3	176.7	166.2	377.3	388.3	400.0	412.1	422.4	432.1

Sources: Burundi authorities; IMF staff estimates and projections.

^{^1/}Projections assuming that the unidentified BOP financing is filled.

^{Table 4.}

Burundi: Central Bank Accounts, 2019–27

(BIF billion)

				2019	2020	2021	2022	2023	2024	2025	2026	2027
				Est.			Proj.
	Net foreign assets			-129.4	-93.1	-141.3	-167.2	-237.3	-314.1	-342.9	-383.6	-423.2
		Assets		241.8	250.9	593.2	612.0	588.6	562.1	587.0	597.9	611.0
		Liabilities		371.2	344.0	734.6	779.2	825.9	876.2	929.8	981.5	1034.2
	Net domestic assets			963.5	1115.5	1308.2	1531.2	1762.6	2022.9	2258.8	2510.7	2776.6
		Domestic credit		349.5	439.2	182.2	283.9	390.0	608.6	608.6	608.6	608.6
			Net claims on the government	324.8	410.6	152.2	254.0	360.1	578.7	578.7	578.7	578.7
			Other credit to the economy	24.7	28.6	29.9	29.9	29.9	29.9	29.9	29.9	29.9
		Other items, net (assets = +)		614.0	676.3	1126.1	1247.3	1372.6	1414.3	1650.2	1902.1	2168.0
	Reserve money			834.1	1022.4	1166.9	1364.0	1525.3	1708.8	1916.0	2127.0	2353.4
		Currency in circulation		360.0	433.3	473.8	588.9	659.5	739.8	830.4	922.8	1021.8
		Bank reserves		418.4	524.2	618.1	693.1	776.2	870.7	977.4	1086.1	1202.6
		Cash in vault		44.3	65.8	86.1	99.2	115.5	134.8	157.4	182.2	210.2
		Other nonbank deposits		11.5	14.1	18.0	18.0	18.0	18.0	18.0	18.0	18.0
Memorandum items:
	Net foreign assets of BRB (US$ million)
		Assets ^1/		118.8	131.0	326.9	386.8	316.2	284.5	274.8	280.1	288.5
		Liabilities		197.3	176.7	166.2	377.3	388.3	400.0	412.1	422.4	432.1

Sources: Burundi authorities; IMF staff estimates and projections.

^{^1/}Projections assuming that the unidentified BOP financing is filled.

^{Table 5a.}

Burundi: Balance of Payments, 2019–27

(US$ Million)

Sources: Burundi authorities; and IMF staff estimates and projections. ¹ Based on preliminary information provided by donors. ² Includes prospective IMF disbursements and CCRT grants. ³ Including trade credits and grants. BPM6 manual defines other investment as a residual category that includes all other changes in assets and liabilities of public and private sectors including trade credits and grants. ⁴ Includes recent SDR allocation as adviced in BPM6 manual.

^{Table 5b.}

Burundi: Balance of Payments, 2019–27

(Percent of GDP)

Sources; Burundi authorities; and IMF staff estimates and projections.

^¹Based on preliminary information provided by donors.

^²Includes prospective IMF disbursements and CCRT grants.

^³Including trade credits and grants. BPM6 manual defines other investment as a residual category that includes all other changes in assets and liabilities of public and private sectors including trade credits and grants.

^{Table 5b.}

Burundi: Balance of Payments, 2019–27

(Percent of GDP)

				2019	2020		2021		2022	2023	2024	2025	2026	2027
				Est.	Pre-Covid	Est.	Pre-Covid	Proj.	Proj.
Current account				-11.6	-16.9	-10.2	-16.4	-13.4	-14.4	-14.0	-13.3	-11.2	-10.4	-9.9
(excluding official transfers)				-11.6	-16.9	-10.2	-16.4	-13.4	-14.4	-14.5	-13.8	-11.7	-10.9	-10.4
Trade balance				-17.9	-21.0	-19.3	-20.7	-21.6	-22.7	-22.3	-21.3	-19.1	-15.2	-17.4
Exports, f.o.b,				7.3	5.8	6.0	6.0	4.9	7.8	7.2	6.9	7.1	6.9	6.9
	Of which: coffee			1.3	1.2	0.8	1.3	1.1	1.2	1.2	1.2	1.2	1.1	1.1
			gold	2.2	2.3	1.5	2.2	1.2	1.9	1.7	1.6	1.8	1.7	1.7
Imports, f.o.b.				-25.2	-26.8	-25.3	-26.7	-26.6	-30.4	-29.5	-28.2	-26.1	-25.1	-24.3
	Of which; petroleum products			-5.3	-4.7	-4.5	-4.4	-5.0	-7.0	-6.1	-5.2	-4.3	-4.0	-3.7
	Of which: Covid related imports			...	...	-0.07	...	-0.2	-0.4	-0.4	...	...	...	...
	Of which; Capital imports			-5.0	...	-6.2	...	-5.9	-6.3	-6.3	-6.4	-6.0	-5.8	-5.6
Services (net)				-5.9	-4.8	-5.0	-4.5	-6.4	-6.1	-5.8	-5.5	-4.9	-4.6	-4.4
Income (net)				0.3	0.2	0.5	0.2	0.5	0.4	0.3	0.3	0.3	0.3	0.3
	Of which: interest on public debt			-0.1	-0.2	-0.2	-0.2	-0.2	-0.2	-0.2	-0.2	-0.2	-0.2	-0.2
Current transfers (net)				11.9	8.6	13.5	8.6	14.1	14.0	13.7	13.1	12.5	12.1	11.7
	Of which; Workers’ remittances			2.4	1.3	3.5	1.3	3.8	4.1	3.6	3.5	3.3	3.2	3.1
Capital account^¹				4.5	4.5	4.4	4.5	4.4	10.1	10.2	7.9	7.6	7.4	6.9
Financial account^²				9.1	12.4	5.9	12.0	13.6	4.0	3.4	5.0	3.7	3.0	3.0
	Direct investment			0.0	0.0	0.2	0.0	0.2	0.2	0.2	0.2	0.2	0.2	0.2
	Other investment^³			9.1	12.4	5.7	11.9	13.4	3.8	3.2	4.7	3.4	2.8	2.8
		Assets		-1.2	-2.5	-3.2	-2.4	-1.4	-2.2	-1.9	-2.0	-2.0	-1.9	-1.9
		Liabilities		10.4	14.9	8.9	14.4	14.7	6.0	5.0	6.7	5.4	4.7	4.7
Errors and omissions				-0.6	0.0	-0.8	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Overall balance				1.5	0.0	-0.7	0.0	4.6	-0.2	-0.5	-0.5	0.1	-0.1	0.0
Financing (increase in assets = -)				-1.5	0.0	0.7	0.0	-5.0	0.0	0.5	0.5	-0.1	0.1	0.0
	Of which: change in official reserves			-1.4	0.0	0.6	0.0	-5.9	-2.3	-0.4	-0.1	-0.3	-0.3	-0.4
	Exceptional financing			0.0	0.0	0.004	0.0	0.01	0.0	0.0	0.0	0.0	0.0	0.0
		Rescheduling of debt service (DSSS)		0.0	0.0	0.004	0.0	0.01	0.0	0.0	0.0	0.0	0.0	0.0

Sources; Burundi authorities; and IMF staff estimates and projections.

^¹Based on preliminary information provided by donors.

^²Includes prospective IMF disbursements and CCRT grants.

^{Table 5b.}

Burundi: Balance of Payments, 2019–27

(Percent of GDP)

				2019	2020		2021		2022	2023	2024	2025	2026	2027
				Est.	Pre-Covid	Est.	Pre-Covid	Proj.	Proj.
Current account				-11.6	-16.9	-10.2	-16.4	-13.4	-14.4	-14.0	-13.3	-11.2	-10.4	-9.9
(excluding official transfers)				-11.6	-16.9	-10.2	-16.4	-13.4	-14.4	-14.5	-13.8	-11.7	-10.9	-10.4
Trade balance				-17.9	-21.0	-19.3	-20.7	-21.6	-22.7	-22.3	-21.3	-19.1	-15.2	-17.4
Exports, f.o.b,				7.3	5.8	6.0	6.0	4.9	7.8	7.2	6.9	7.1	6.9	6.9
	Of which: coffee			1.3	1.2	0.8	1.3	1.1	1.2	1.2	1.2	1.2	1.1	1.1
			gold	2.2	2.3	1.5	2.2	1.2	1.9	1.7	1.6	1.8	1.7	1.7
Imports, f.o.b.				-25.2	-26.8	-25.3	-26.7	-26.6	-30.4	-29.5	-28.2	-26.1	-25.1	-24.3
	Of which; petroleum products			-5.3	-4.7	-4.5	-4.4	-5.0	-7.0	-6.1	-5.2	-4.3	-4.0	-3.7
	Of which: Covid related imports			...	...	-0.07	...	-0.2	-0.4	-0.4	...	...	...	...
	Of which; Capital imports			-5.0	...	-6.2	...	-5.9	-6.3	-6.3	-6.4	-6.0	-5.8	-5.6
Services (net)				-5.9	-4.8	-5.0	-4.5	-6.4	-6.1	-5.8	-5.5	-4.9	-4.6	-4.4
Income (net)				0.3	0.2	0.5	0.2	0.5	0.4	0.3	0.3	0.3	0.3	0.3
	Of which: interest on public debt			-0.1	-0.2	-0.2	-0.2	-0.2	-0.2	-0.2	-0.2	-0.2	-0.2	-0.2
Current transfers (net)				11.9	8.6	13.5	8.6	14.1	14.0	13.7	13.1	12.5	12.1	11.7
	Of which; Workers’ remittances			2.4	1.3	3.5	1.3	3.8	4.1	3.6	3.5	3.3	3.2	3.1
Capital account^¹				4.5	4.5	4.4	4.5	4.4	10.1	10.2	7.9	7.6	7.4	6.9
Financial account^²				9.1	12.4	5.9	12.0	13.6	4.0	3.4	5.0	3.7	3.0	3.0
	Direct investment			0.0	0.0	0.2	0.0	0.2	0.2	0.2	0.2	0.2	0.2	0.2
	Other investment^³			9.1	12.4	5.7	11.9	13.4	3.8	3.2	4.7	3.4	2.8	2.8
		Assets		-1.2	-2.5	-3.2	-2.4	-1.4	-2.2	-1.9	-2.0	-2.0	-1.9	-1.9
		Liabilities		10.4	14.9	8.9	14.4	14.7	6.0	5.0	6.7	5.4	4.7	4.7
Errors and omissions				-0.6	0.0	-0.8	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Overall balance				1.5	0.0	-0.7	0.0	4.6	-0.2	-0.5	-0.5	0.1	-0.1	0.0
Financing (increase in assets = -)				-1.5	0.0	0.7	0.0	-5.0	0.0	0.5	0.5	-0.1	0.1	0.0
	Of which: change in official reserves			-1.4	0.0	0.6	0.0	-5.9	-2.3	-0.4	-0.1	-0.3	-0.3	-0.4
	Exceptional financing			0.0	0.0	0.004	0.0	0.01	0.0	0.0	0.0	0.0	0.0	0.0
		Rescheduling of debt service (DSSS)		0.0	0.0	0.004	0.0	0.01	0.0	0.0	0.0	0.0	0.0	0.0

Sources; Burundi authorities; and IMF staff estimates and projections.

^¹Based on preliminary information provided by donors.

^²Includes prospective IMF disbursements and CCRT grants.

^{Table 6.}

Burundi: Banking System Soundness Indicators, 2019–21

(Percent, unless otherwise indicated)

Source; Burundi authorities.

^{Table 6.}

Burundi: Banking System Soundness Indicators, 2019–21

(Percent, unless otherwise indicated)

		2019	2020				2021
		Dec	Mar	Jun	Sep	Dec	Mar	Jun	Sep
Capital Requirement
	Capital requirement overweighted assets Csolvency ratio)	21.6	27.5	26.2	23.2	23.S	26.2	247	22.7
	Core capital (Tier 1 capital) overweighted assets	202	25.9	246	21.9	22.4	247	23.4	20.2
Quality of assets
	Nonperforming loans (percent of total gross loans granted)	5.6	6.6	6.2	6.8	5.4	4.8	42	4.1
	Provisions (percent of nonperforming loans)	56.9	71.0	72.0	68.6	69.2	67.7	65.1	53.1
	Nonperforming loans net of provisions (percent of capital)	2,1	5,3	4.9	6,1	4,4	41	42	6,2
	Large exposures (percent of capital)	73.6	74.8	62.1	59.9	51.1	59.0	79.5	57.3
Profitability rates
	Return on assets	4.1	1.1	2.1	3.4	3.9	1.0	1.9	2.9
	Return on equity capital	35.5	9.3	17.7	29.4	32.3	7.5	15.7	23.8
	Net interest (percent of gross results)	64.1	70.4	72.0	70.7	70.7	71.9	70.8	68.0
	Costs excluding interest (percent of gross outturn)	43,6	44,6	44,6	43,2	47,9	48,3	47,4	46,7
Liquidity
	Liquid assets (percent of all loans granted)	31.3	28.5	27.8	247	28.8	21.2	25.2	21.7
	Liquid assets (percent of short-term commitments)	18,1	17,2	16,8	142	15,5	11,6	141	14,6

Source; Burundi authorities.

^{Table 6.}

Burundi: Banking System Soundness Indicators, 2019–21

(Percent, unless otherwise indicated)

		2019	2020				2021
		Dec	Mar	Jun	Sep	Dec	Mar	Jun	Sep
Capital Requirement
	Capital requirement overweighted assets Csolvency ratio)	21.6	27.5	26.2	23.2	23.S	26.2	247	22.7
	Core capital (Tier 1 capital) overweighted assets	202	25.9	246	21.9	22.4	247	23.4	20.2
Quality of assets
	Nonperforming loans (percent of total gross loans granted)	5.6	6.6	6.2	6.8	5.4	4.8	42	4.1
	Provisions (percent of nonperforming loans)	56.9	71.0	72.0	68.6	69.2	67.7	65.1	53.1
	Nonperforming loans net of provisions (percent of capital)	2,1	5,3	4.9	6,1	4,4	41	42	6,2
	Large exposures (percent of capital)	73.6	74.8	62.1	59.9	51.1	59.0	79.5	57.3
Profitability rates
	Return on assets	4.1	1.1	2.1	3.4	3.9	1.0	1.9	2.9
	Return on equity capital	35.5	9.3	17.7	29.4	32.3	7.5	15.7	23.8
	Net interest (percent of gross results)	64.1	70.4	72.0	70.7	70.7	71.9	70.8	68.0
	Costs excluding interest (percent of gross outturn)	43,6	44,6	44,6	43,2	47,9	48,3	47,4	46,7
Liquidity
	Liquid assets (percent of all loans granted)	31.3	28.5	27.8	247	28.8	21.2	25.2	21.7
	Liquid assets (percent of short-term commitments)	18,1	17,2	16,8	142	15,5	11,6	141	14,6

Source; Burundi authorities.

^{Table 7.}

Burundi: Indicators of Capacity to Repay the Fund, 2019–27

Sources: IMF staff estimates and projections.

^¹Total debt service includes IMF repurchases and repayments.

^{Table 7.}

Burundi: Indicators of Capacity to Repay the Fund, 2019–27

		2019	2020	2021	2022	2023	2024	2025	2026	2027
		Est.			Proj.
Fund obligations based on existing credit
(SDR million)
	Principal (incl. CCRT)	11.8	2.2	0.0	2.9	4.5	2.5	0.5	0.0	10.8
	Charges and interest	0.10	0.36	0.0	0.5	1.0	1.0	1.0	1.0	1.0
Fund obligations based on existing and prospective credit
(SDR million)
	Principal	11.8	7.6	0.0	2.9	4.5	2.5	0.5	0.0	10.8
	Principal (incl. CCRT)	11.8	2.2	0.0	2.9	4.5	2.5	0.5	0.0	10.8
	Charges and interest 0.1	0.4	0.0	0.5	1.0	1.0	1.0	1.0	1.0
Total obligations based on existing and prospective credit
	SDR million	11.9	8.0	0.0	3.4	5.5	3.5	1.5	1.0	11.8
	SDR million (incl, CCRT)	11.9	2.5	0.0	3.4	5.5	3.5	1.5	1.0	11.8
	US$ million (incl. CCRT)	16.4	3.5	0.0	4.6	75	4.8	2.1	1.4	16.2
	Percent of exports of goods and services	5.5	1.3	0.0	1.2	1.9	1.2	0.5	0.3	3.2
	Percent of debt service^¹	62.9	15.2	0.1	14.5	19.2	12.0	4.9	3.3	28.6
	Percent of tax revenue	3.1	0.5	0.0	0.6	1.0	0.6	0.2	0.1	1.5
	Percent of gross official reserves	14.4	3.7	0.0	1.7	3.1	2.2	0.9	0.6	7.3
	Percent of GDP	0.5	0.1	0.0	0.1	0.2	0.1	0.0	0.0	0.3
	Percent of quota	7.7	1.6	0.0	2.2	3.6	2.3	1.0	0.6	7.6
Outstanding Fund credit
	SDR million	34.0	18.1	67.8	61.4	56.9	54.4	53.9	53.9	43.1
	US$ million	46.9	26.0	94.8	83.2	78.1	75.3	74.7	74.7	59.7
	Percent of exports of goods and services	15.7	9.6	37.9	21.8	20.0	18.3	16.5	15.5	11.7
	Percent of debt service’	179.9	112.3	463.8	263.9	199.9	187.3	179.3	179.3	105.2
	Percent of tax revenue	8.7	4.6	15.0	11.7	10.1	9.0	8.1	7.5	5.6
	Percent of gross official reserves	41.3	27.5	35.6	31.6	32.0	33.7	32.9	33.3	26.9
	Percent of GDP	1.6	0.8	2.8	2.3	2.0	1.7	1.6	1.5	1.1
	Percent of quota	22.1	11.7	44.0	39.9	369	35.3	35.0	35.0	28.0
Net use of Fund credit (SDR million)		-11.8	-2.2	53.9	-2.9	-4.5	-2.5	-0.5	0.0	-10.8
	Disbursements	0.0	0.0	53.9	0.0	0.0	0.0	0.0	0.0	0.0
	Repayments and repurchases (incl. CCRT)	11.8	2.2	0.0	2.9	4.5	2.5	0.5	0.0	10.8
Memorandum items:
	Exports of goods and services (US$ million)	299.2	271.6	250.0	381.9	390.0	410.9	453.7	481.2	510.4
	Debt service (US$ million)	26.1	23.1	20.4	31.5	39.0	40.2	41.6	41.6	56.8
	Tax revenue (US$ million)	536.5	560.8	633.3	709.3	769.4	839.6	918.0	993.4	1070.3
	Gross official reserves (US$ million; excl. financing needs)	113.4	94.3	266.6	263.3	243.7	223.6	227.1	224.3	222.3
	Nominal GDP ((US$ million)	3012.5	3086.4	3350.8	3644.4	3962.8	4316.0	4703.8	5074.9	5456.2
	Quota (SDR, million)	154.0	154.0	154.0	154.0	154.0	154.0	154.0	154.0	154.0

Sources: IMF staff estimates and projections.

^¹Total debt service includes IMF repurchases and repayments.

^{Table 7.}

Burundi: Indicators of Capacity to Repay the Fund, 2019–27

		2019	2020	2021	2022	2023	2024	2025	2026	2027
		Est.			Proj.
Fund obligations based on existing credit
(SDR million)
	Principal (incl. CCRT)	11.8	2.2	0.0	2.9	4.5	2.5	0.5	0.0	10.8
	Charges and interest	0.10	0.36	0.0	0.5	1.0	1.0	1.0	1.0	1.0
Fund obligations based on existing and prospective credit
(SDR million)
	Principal	11.8	7.6	0.0	2.9	4.5	2.5	0.5	0.0	10.8
	Principal (incl. CCRT)	11.8	2.2	0.0	2.9	4.5	2.5	0.5	0.0	10.8
	Charges and interest 0.1	0.4	0.0	0.5	1.0	1.0	1.0	1.0	1.0
Total obligations based on existing and prospective credit
	SDR million	11.9	8.0	0.0	3.4	5.5	3.5	1.5	1.0	11.8
	SDR million (incl, CCRT)	11.9	2.5	0.0	3.4	5.5	3.5	1.5	1.0	11.8
	US$ million (incl. CCRT)	16.4	3.5	0.0	4.6	75	4.8	2.1	1.4	16.2
	Percent of exports of goods and services	5.5	1.3	0.0	1.2	1.9	1.2	0.5	0.3	3.2
	Percent of debt service^¹	62.9	15.2	0.1	14.5	19.2	12.0	4.9	3.3	28.6
	Percent of tax revenue	3.1	0.5	0.0	0.6	1.0	0.6	0.2	0.1	1.5
	Percent of gross official reserves	14.4	3.7	0.0	1.7	3.1	2.2	0.9	0.6	7.3
	Percent of GDP	0.5	0.1	0.0	0.1	0.2	0.1	0.0	0.0	0.3
	Percent of quota	7.7	1.6	0.0	2.2	3.6	2.3	1.0	0.6	7.6
Outstanding Fund credit
	SDR million	34.0	18.1	67.8	61.4	56.9	54.4	53.9	53.9	43.1
	US$ million	46.9	26.0	94.8	83.2	78.1	75.3	74.7	74.7	59.7
	Percent of exports of goods and services	15.7	9.6	37.9	21.8	20.0	18.3	16.5	15.5	11.7
	Percent of debt service’	179.9	112.3	463.8	263.9	199.9	187.3	179.3	179.3	105.2
	Percent of tax revenue	8.7	4.6	15.0	11.7	10.1	9.0	8.1	7.5	5.6
	Percent of gross official reserves	41.3	27.5	35.6	31.6	32.0	33.7	32.9	33.3	26.9
	Percent of GDP	1.6	0.8	2.8	2.3	2.0	1.7	1.6	1.5	1.1
	Percent of quota	22.1	11.7	44.0	39.9	369	35.3	35.0	35.0	28.0
Net use of Fund credit (SDR million)		-11.8	-2.2	53.9	-2.9	-4.5	-2.5	-0.5	0.0	-10.8
	Disbursements	0.0	0.0	53.9	0.0	0.0	0.0	0.0	0.0	0.0
	Repayments and repurchases (incl. CCRT)	11.8	2.2	0.0	2.9	4.5	2.5	0.5	0.0	10.8
Memorandum items:
	Exports of goods and services (US$ million)	299.2	271.6	250.0	381.9	390.0	410.9	453.7	481.2	510.4
	Debt service (US$ million)	26.1	23.1	20.4	31.5	39.0	40.2	41.6	41.6	56.8
	Tax revenue (US$ million)	536.5	560.8	633.3	709.3	769.4	839.6	918.0	993.4	1070.3
	Gross official reserves (US$ million; excl. financing needs)	113.4	94.3	266.6	263.3	243.7	223.6	227.1	224.3	222.3
	Nominal GDP ((US$ million)	3012.5	3086.4	3350.8	3644.4	3962.8	4316.0	4703.8	5074.9	5456.2
	Quota (SDR, million)	154.0	154.0	154.0	154.0	154.0	154.0	154.0	154.0	154.0

Sources: IMF staff estimates and projections.

^¹Total debt service includes IMF repurchases and repayments.

^{Table 8.}

Burundi: Sustainable Development Indicators

Source: World Bank Development Indicators

^{Table 8.}

Burundi: Sustainable Development Indicators

Goals	Selected Indicators	Latest Observation		Baseline
Goals	Selected Indicators	Indicator	Year	Baseline
End Poverty	Proportion of population living below the international food poverty line (%)	72.8	2013	78.5	2005
End Hunger	Prevalence of under nourishment (%) or stunting in children under five increased	54.0	2019	57.7	2005
Good Health and Well-being	Maternal Mortality Ratio (per 100,000)	580.0	2017	785	2010
Inclusive and Equitalale Education	Participation rate in organized learning Primary net attendance rate (%)	93.4	2018	41	2000
Gender Equality	Proportion of seats held by women in local government or the National Assembly (%)	38.2	2021	18	2004
Sustainable and Modern Energy	Household access to electricity (%)	11.7	2020	5.3	2010
Sustainable Growth and Decent Work	Annual growth rate of real GDP per capita (%)	-21	2020	1.5	2004
Infrastructure, Industrialization, and Innovation	Manufacturing employment as a percentage of total employment (%)	3.3	2019	2.4	2003
Reduced Inequalities within and among countries	Gini coefficient	38.6	2013	33.4	2006
Inclusive Cities and Communities	Proportion of urban population living in inadequate housing	47.7	2018	54	2005
Conseri’e and sustainably use of oceans, seas and marine resources	Improving fisheries management and utilization – quantity of fish farmed	21860T	2018	11050T	2002

Source: World Bank Development Indicators

^{Table 8.}

Burundi: Sustainable Development Indicators

Goals	Selected Indicators	Latest Observation		Baseline
Goals	Selected Indicators	Indicator	Year	Baseline
End Poverty	Proportion of population living below the international food poverty line (%)	72.8	2013	78.5	2005
End Hunger	Prevalence of under nourishment (%) or stunting in children under five increased	54.0	2019	57.7	2005
Good Health and Well-being	Maternal Mortality Ratio (per 100,000)	580.0	2017	785	2010
Inclusive and Equitalale Education	Participation rate in organized learning Primary net attendance rate (%)	93.4	2018	41	2000
Gender Equality	Proportion of seats held by women in local government or the National Assembly (%)	38.2	2021	18	2004
Sustainable and Modern Energy	Household access to electricity (%)	11.7	2020	5.3	2010
Sustainable Growth and Decent Work	Annual growth rate of real GDP per capita (%)	-21	2020	1.5	2004
Infrastructure, Industrialization, and Innovation	Manufacturing employment as a percentage of total employment (%)	3.3	2019	2.4	2003
Reduced Inequalities within and among countries	Gini coefficient	38.6	2013	33.4	2006
Inclusive Cities and Communities	Proportion of urban population living in inadequate housing	47.7	2018	54	2005
Conseri’e and sustainably use of oceans, seas and marine resources	Improving fisheries management and utilization – quantity of fish farmed	21860T	2018	11050T	2002

Source: World Bank Development Indicators

Annex I. The COVID-19 Pandemic and The Authorities’ Response

1. The pandemic: The first COVID-19 case in Burundi was reported on March 31, 2020. As of June 14, 2022, 42,330 cases and 15 deaths have been reported. New cases surpassed 1,000 cases per week in the second half of 2021, with a peak of more than 5,000 cases during the last week of December 2021 (up from an average of 20 cases per week in 2020 and an average of 371 cases per week during January-June 2021, see Figure A1.1). They are now down to about 446 cases per week since early 2022. Two large-scale testing campaigns were conducted during July 6–October 6, 2020, and January 11–February 11, 2021. The number of cases is likely underestimated as testing capacity remains weak with less than 3 percent of the population tested as of June 12, 2022 (Figure A1.2)

2. Government response:

Bujumbura airport was closed from March to November 2020. On January 11, 2021, the authorities closed land and sea borders to passengers, and imposed new restrictions to passengers arriving at the Bujumbura airport. In September 2021, the authorities introduced a fine of about US$ 50 for not wearing a mask in public places and public transportation in Bujumbura. The fine has been removed and masks are no longer mandatory.
The authorities developed a pandemic response plan — focusing on strengthening the health care system, the social safety net, and parts of the road network to facilitate access to sick people. The response plan was estimated at about US$ 150 million (4.5 percent of 2021 GDP), of which sanitary measures costing US$ 58 million (1.7 percent of 2021 GDP). The authorities have promoted preventative measures but have limited the use of social distancing to minimize adverse economic effects. They subsidized the price of soap during June-September 2020 and are subsidizing water for standpipes, up to 50 percent. They also hired additional doctors and nurses and have granted tax holidays to affected businesses.
As part of the response plan of 4.5 percent of GDP, the authorities spent 1.1 percent of GDP in 2020/21 (Text Table), including sanitary and non-sanitary measures. They plan to spend about 1 percent of GDP in 2021/22 (excluding vaccines). Staff estimates that a cumulated US$ 36.7 million (1.1 percent of GDP) has been spent on this plan at end-December 2021.
The central bank increased flexibility in loan restructuring with targeted and time-bound extensions of loan maturities to hard-hit borrowers. A new refinancing window has also been opened for banks extending long-term loans to high-growth priority sectors.

^{Text Table A1.1.}

Burundi: COVID-19 Spending ^1/

Sources: Burundi authorities and IMF staff estimates.

^{^1/}Excludes spending on vaccination. Total Covid-related spending could be higher in reality but not separable from other budget lines due to data limitations.

^{^2/}For FY2D2D/21, it is spending up to February 2021.

^{Text Table A1.1.}

Burundi: COVID-19 Spending ^1/

		FY2020/21		FY2021/22
		BIF Billion	Percent of GDP	BIF Billion	Percent of GDP
Total		68.8	1.10	70.4	1.00
	Of which:
	Health infrastructure, incl. tents ^2/	15.6	0.25	58.0	0.83
	Reagents and drugs ^2/	6.8	0.11	10.8	0.15
	Recruitment of lab workers	...	...	0.4	0.01
	Subsidy of various products to ensure cleanliness	...	...	1.2	0.02
	Operating costs of theCovid-19 Committee ^2/	1.8	0.03	...	...
	Spending March-June 2021 (not yet itemized)	44.5	0.71	...	...

Sources: Burundi authorities and IMF staff estimates.

^{^1/}Excludes spending on vaccination. Total Covid-related spending could be higher in reality but not separable from other budget lines due to data limitations.

^{^2/}For FY2D2D/21, it is spending up to February 2021.

^{Text Table A1.1.}

Burundi: COVID-19 Spending ^1/

		FY2020/21		FY2021/22
		BIF Billion	Percent of GDP	BIF Billion	Percent of GDP
Total		68.8	1.10	70.4	1.00
	Of which:
	Health infrastructure, incl. tents ^2/	15.6	0.25	58.0	0.83
	Reagents and drugs ^2/	6.8	0.11	10.8	0.15
	Recruitment of lab workers	...	...	0.4	0.01
	Subsidy of various products to ensure cleanliness	...	...	1.2	0.02
	Operating costs of theCovid-19 Committee ^2/	1.8	0.03	...	...
	Spending March-June 2021 (not yet itemized)	44.5	0.71	...	...

Sources: Burundi authorities and IMF staff estimates.

^{^1/}Excludes spending on vaccination. Total Covid-related spending could be higher in reality but not separable from other budget lines due to data limitations.

^{^2/}For FY2D2D/21, it is spending up to February 2021.

3. Vaccination. Vaccination started at end-October 2021 with about 100 people vaccinated per day on average. Only 13,811 people (0.1 percent of the population) were fully vaccinated as of June 5, 2022. In 2021, Burundi received a donation of 500,000 doses of Sinopharm vaccine from China and a donation of 302,400 Johnson and Johnson vaccine doses through the African Vaccine Acquisition Trust (AVAT), which is expected to donate a total of 2.4 million doses of this vaccine to Burundi.

4. Urgent needs. Stronger diagnostic capacity is warranted (rapid testing and molecular analysis machines to identify variants of the virus), as well as better logistics (vehicles and the associated consumables and construction of travelers’ paths to reduce contamination) to contain imported cases and community transmission.

5. Donor support. So far, financial support has included a grant from the World Bank (US$5 million) and the fiscal space created by two years of IMF CCRT debt relief through April 2022 (SDR 17.96 million) and debt service relief from Exim Bank of China and the Kuwait Fund (US$ 0.93 million) under the G20 Debt Service Suspension Initiative (DSSI).

6. Governance. A technical committee for the response to the COVID-19 pandemic was set up. A single fiduciary fund, with an account opened at the BRB, was set up to centralize donor funding. The first COVID-19 report covering operations from the fiduciary fund was transmitted in August 2021 to the Court of Auditors, which started its audit in April 2022. The authorities emphasized that delays in auditing this COVID-19 report were due to a backlog of audits of government financial statements, which were only completed in mid-January 2022.

Annex II. External Sector Assessment

^¹Only the EBA-lite CA model was used in this analysis. EBA-lite REER approach has limitations when applied to countries with large structural changes or some data inconsistences. Additional to that, when CA and REER point to different conclusion, the CA model is often more informative and reliable (IMF, 2016).

^²Given the data issue on NIIP, the ESA for Burundi focuses on the current account EBA-lite method (see footnote 1 in the main text).

Overall Assessment. The 2021 external position of Burundi was substantially weaker than the level implied by fundamentals and desirable policies, as per the Fund’s external balance assessment (EBA-lite). This situation reflects large external imbalances and foreign exchange reserves being below adequacy levels, although the latter were boosted by the IMF’s general SDR allocation in August 2021 and the RCF disbursement in October 2021. Profound distortions in the FX market may also have contributed to sustaining the imbalances. External imbalances are projected to persist under the baseline scenario.

Potential Policy Responses. To achieve external rebalancing, fiscal adjustment and other measures aiming at improving competitiveness (including labor market reform) are required. Allowing greater reforms in other sectors, such as banking and financial, are also essential to increase productivity and ensure a balanced economic and social development. Ambitious reforms of the exchange rate policy aimed at reducing existing FX access limitations and promoting a market-based exchange rate will contribute in the short term to set the path for converging to medium term rebalancing. In addition, seeking development partners support will help to provide the country with additional FX reserves to cushion the path of adjustment and support an exit path from fragility.

Foreign Assets and Liabilities: Position and Trajectory

Background. The latest net international investment position (NIIP) data for Burundi are dated 2018 and are outdated for this assessment.

Current Account

Background. The current account (CA) deficit amounted to 13.4 percent of GDP in 2021—3.5 percent of GDP higher than in 2020 (10.2 percent of GDP). The CA deficit averaged around 11.5 percent of GDP during 2015–2019, a lower level compared to the 2010–2014 era (16.3 percent of GDP on average), owing to the country’s isolation following the 2015 political crisis which led to lower capital inflows, compressed imports, and a drawdown of reserves to very low levels. More recently, with the COVID-19 pandemic, the CA deficit slightly improved to 10.2 percent of GDP in 2020 thanks to lower international fuel prices, countercyclical workers’ remittances, and lower imports growth due to FX rationing. Remittances were of good support to the external sector, growing by more than 49 percent between 2019 and 2020 to 3.5 percent of GDP in 2020 (1.1 percent of GDP in 2018), and the trend is likely to be sustained in the near to medium term. However, exports decreased sharply, reflecting partly the closure of Burundi’s international airport and lockdown measures in trading partner countries, which disrupted exports of the main commodities (coffee, tea, gold, food industry).

Burundi: Contributions to Current Account

Balance (percent of GDP)

Sources: Burundi authorities; IMF staff estimates and projections.

The CA deficit is projected to further increase in 2022 before stabilizing at around 12.5 percent of GDP on average over the medium term. The CA balance deterioration from 13.4 percent of GDP in 2021 to 15.3 percent of GDP in 2022 is mainly due to the negative impact of the war in Ukraine with higher imports prices (intermediate goods, especially petroleum products) and lower exports prices (including coffee and tea). In addition, the RCF disbursement and SDR allocation that improved FX availability; import volumes are forecasted to increase due to the COVID-19 response plan (including vaccines and COVID tests) and capital and intermediate goods imports consistent with development projects and GDP growth prospects for the medium term. Remittances also played an efficient countercyclical role in containing CA deterioration. Exports are projected to recover, although only progressively owing to supply chain disruptions and slower investment flows. Over the medium term, the CA deficit is projected to average around 22 percent of GDP with exports increases (food industry, coffee, tea) compensated by large capital and intermediate goods needs. Beyond 2024, the CA deficit would subsequently narrow as terms of trade improve slightly and current transfers strengthen.

Assessment. The CA EBA-lite model^¹ shows that the CA position in 2021 was substantially weaker than the level consistent with medium-term fundamentals and desirable policies. The current account norm—the level of current account that is in line with fundamentals and desirable policy levels—is estimated at -5.2 percent of GDP. The policy gap relates mainly to an inadequate level of reserves (compare to the ARA metric) and the expansive fiscal policy (a deficit of 7.8 percent of GDP in2021) beyond the desirable stance (2 percent of GDP). The policy imbalances underly the importance of a growth and export friendly fiscal adjustment, as well as policies to improve competitiveness and contain external imbalances. With the observed CA deficit of 13.4 percent, the EBA-lite CA model indicates a CA gap of -8.8 percent of GDP in 2021, of which a policy gap of 4.5 percent of GDP. As a result, the REER gap is estimated at 68.6 percent.

Burundi: Model Estimated for 2021

(In percent of GDP)

		CA model ^1/
CA-Actual		-13.4
	Cyclical contributions (from model) (-)	0.6
	COVID-19 adjustor (-) ^2/	0.1
	Additional temporary/statistical factors (-)	0.0
	Natural disasters and conflicts (-)	-0.2
Adjusted CA		-14.0
CA Norm (from model) ^3/		-5.2
	Adjustments to the norm (-)	0.0
Adjusted CA Norm		-5.2
CA Gap		-8.8
	o/w Relative policy gap	4.5
Elasticity		-0.13
REER Gap (in percent)		68.6
^1/ Based on the EBA-lite 3.0 methodology ^2/ Additional cyclical adjustment to account for the temporary impact remittances (0.1 percent of GDP). ^3/ Cyclically adjusted, including multilateral consistency adjustments.

Real Exchange Rate

Background. Burundi’s real effective exchange rate (REER) has been on an appreciating trend since 2015. Although the nominal effective exchange rate has been stable, the REER appreciation accelerated from a moderate 2 percent in early 2014 to 19 percent on average in 2021 (index: 2010 = 100). A higher inflation rate in Burundi than in trading partners in recent years has largely contributed to this real appreciation of the local currency.

Assessment. The EBA-lite current account approach confirms the overvaluation of the REER. The REER gap is estimated at around 68.6 percent, close to the parallel FX market premium (around 62.5 percent at mid-June 2022). Both the size and the premium of the parallel FX market has been rising (0.6 percent of premium at end-2014), which points to an increasing REER overvaluation.

Burundi: effective exchange rates and prices, 2014–21 Index, 2010= 100

Capital and Financial Accounts: Flows and Policy Measures

Background. In 2021, Burundi’s CA deficit was largely financed by external inflows. The financial and capital accounts improved significantly owing to higher project grants and trade credit, given the issue on the quality of other investments data the full mechanism on the CA financing needs more clarifications. Despite the economic shock due to the pandemic, direct investment was resilient in 2021 but remains anemic (0.25 percent of GDP). Over the medium term, direct investment inflows are projected to increase, supported by the National Development Plan (NDP) projects and reforms, which will boost investors’ confidence. The recent SDR allocation (6.6 percent of GDP) provided a large buffer to the financial account and helped significantly to improve the FX coverage in terms of months of imports.

Assessment. A progressive and orderly removal of FX control measures as economic conditions permit, would improve the financial account, and bring in more private flows. Improving the frequency and the quality of financial account data provision, notably on foreign investments and imports financing, would help better grasp developments.

Burundi: Balance on Financial Account (percent of GDP)

Sources: Burundi authorities; IMF staff estimates and projections.

FX Intervention and Reserves Level

Background. Foreign exchange reserve coverage reached 2.1 months of prospective imports at end-December 2021. It was partly bolstered by the latest general IMF SDR allocation (SDR 147.6 million, representing around 0.14 month of imports) and the RCF disbursement (SDR 53,9 million, representing around 0.053 month of imports), from 0.6 month of prospective imports at end-March 2021. Nevertheless, Burundi’s reserves coverage is below the adequate level of international reserves for Burundi from the ARA-CC model, which is estimated at 3.5 months of goods and services imports, slightly higher than the traditional 3-month rule, assuming a fixed exchange rate policy.

In the ARA-CC model^² (developed for credit constrained economies), the adequate level of reserves is derived through an algorithm that balances the absorption smoothing benefits of reserves against the opportunity cost of holding reserves considering country specificities. The absorption smoothing benefits of reserves is the result of two empirical regressions on the role of reserves in preventing a crisis and on the role of reserves in reducing the severity of a crisis. As for the opportunity cost of holding reserves, the marginal product of capital has been chosen (IMF, 2016).

Assessment. Burundi’s FX reserve coverage is below adequate levels. The adequate FX reserves level from the ARA metric should however be regarded as a lower bound, given Burundi’s structural economic characteristics. Indeed, as a commodity intensive economy, Burundi faces adverse effects of terms of trade shocks and adjustment is difficult given the very low elasticity of primary goods’ prices. Therefore, it is crucial for Burundi to hold the needed precautionary FX reserves for market participants confidence on domestic macroeconomic policies. However, the fact that the largest share of the country’s debt is domestic (48.2 percent of GDP against 20.4 percent of GDP for external debt in 2021) represents a mitigating element on the impact of low level of reserves.

^²Given the data issue on NIIP, the ESA for Burundi focuses on the current account EBA-lite method (see footnote 1 in the main text).

Foreign Assets and Liabilities: Position and Trajectory

Background. The latest net international investment position (NIIP) data for Burundi are dated 2018 and are outdated for this assessment.

Current Account

		CA model ^1/
CA-Actual		-13.4
	Cyclical contributions (from model) (-)	0.6
	COVID-19 adjustor (-) ^2/	0.1
	Additional temporary/statistical factors (-)	0.0
	Natural disasters and conflicts (-)	-0.2
Adjusted CA		-14.0
CA Norm (from model) ^3/		-5.2
	Adjustments to the norm (-)	0.0
Adjusted CA Norm		-5.2
CA Gap		-8.8
	o/w Relative policy gap	4.5
Elasticity		-0.13
REER Gap (in percent)		68.6
^1/ Based on the EBA-lite 3.0 methodology ^2/ Additional cyclical adjustment to account for the temporary impact remittances (0.1 percent of GDP). ^3/ Cyclically adjusted, including multilateral consistency adjustments.

Real Exchange Rate

Sources: Burundi authorities; IMF staff estimates and projections.

FX Intervention and Reserves Level

^²Given the data issue on NIIP, the ESA for Burundi focuses on the current account EBA-lite method (see footnote 1 in the main text).

Annex III. Risk Assessment Matrix^¹

Source of Risks	Likelihood	Expected Impact on Economy	Policy Response
Conjunctural shocks and scenarios
*War in Ukraine leads to escalation of sanctions and other disruptions*.	High	High. The continuation of the conflict would have strong negative impacts on economic activity especially on most vulnerable population.	Accelerate and strengthen discussions with donor community. Promote pro-growth and pro-poor fiscal consolidation. Accelerate negotiations with mining companies to brush up exports.
Rising and volatile food and energy prices.	High	High. The increase in food and energy prices following the geopolitical situation might cause a deterioration of the terms of trade for net importers countries like Burundi. Given the relative low level of official reserves, the country might go through some shortages on food and energy products.	Reform of monetary and exchange rate policy. Develop and strengthen domestic subsistence agriculture and food industry.
*Widespread social discontent and political instability.*	High	High. General social unrest would disrupt economic activities and reduce investors’ confidence. Increased pressures on fiscal expenditures (including military spending) would divert resources away from growth-enhancing spending, lowering growth.	Support the vulnerable population with well-targeted measures. Assuming the turbulence is temporary, use fiscal space and monetary policy prudently to support the economy.
Abrupt growth slowdown in China.	Medium	High. Economic slowdown in China will likely have a strong impact on Burundi’s external sector. As one of the main trade partners of Burundi, lower trade with China will result in probable decrease in commodity prices, lower FDIs and delayed infrastructure projects.	Encourage diversification of trade and economic partners. Policies to lower exports concentrations.
Outbreaks of lethal and highly contagious COVID-19 variants lead to subpar/volatile growth, with increased divergence across countries.	Medium	High. The eruption of a new lethal and contagious Corona virus variant would have strong impact on Burundi’s economy through the fall in commodity prices (which are currently on a recovering path e.g., coffee, tea, gold), worsening fiscal situation and a decelerating economic activity.	Accelerate vaccine rollout. Strengthen spending in health sector. Prudent fiscal policy and save resources where possible.
De-anchoring of inflation expectations in the U.S. and/or advanced European economies.	Medium	High. If the trend of rising global inflation is confirmed, the impact on the external sector could be large and has negative effects on growth prospects as FX is critically low. The risk of capital outflows from Burundi looks minor as the country mostly relies on concessional financing.	Increase production in the subsistence agriculture by enlarging cultivated lands and developing the local production inputs (e.g., fertilizers). Accelerate reengagement with donor community and prioritize concessional financing.
Structural Risks
Geopolitical tensions and de-globalization.		Medium. The higher commodity prices could boost commodity exports and support economic growth and reserve build up. Disorderly migration and lower confidence could lead to high public spending on refugees and lower private consumption and investment.	Increase fiscal space through stronger revenue administration and spending framework to better support unforeseen spending obligations. Increase international reserve buffers with a more flexible exchange rate to provide an adequate response to foreign exchange needs of the economy. Implement a more accommodative monetary policy if inflation is in check.
Cyberthreats.	Medium	Low. Global information infrastructure failure will probably have minor impact on Burundi’s economy as the economy does not rely much on private and speculative financial flows.	Increase IT infrastructure development and other cybersecurity measures.
Natural disasters related to climate change.	Medium	Medium. The lower performance of the weather-dependent agricultural sector will significantly weaken growth and exports (coffee and tea). Inflation would rise mainly because of the higher cost of food items.	Increase fiscal space through domestic revenue mobilization measures and spending prioritization and efficiency. Support the most vulnerable sectors and population. Tighten monetary policy to limit second-round inflationary pressures. Strengthen the business environment to further diversify exports and the economy.
Domestic Risks
Adverse weather conditions.	Medium Short Term	High. This would lead to lower agricultural production and slower growth, an increase in food inflation, pressures on public spending and the current account, and adversely affect the vulnerable households.	Guard against second-round effects on inflation. Use targeted programs to help vulnerable groups and reprioritize spending.
*A deterioration of the political and security situation.*	Medium Short to Medium Term	Medium. General social unrest would disrupt economic activities and reduce investors’ confidence. Increased pressures on fiscal expenditures (including military spending) would divert resources away from growth-enhancing spending, lowering growth.	Allow automatic fiscal stabilizers to operate. Support the vulnerable population with well-targeted measures. *Assuming the turbulence is temporary, use fiscal space and monetary policy prudently to support the economy.
*Reengagement with the international community*.	High	High. Increased support from the international community will ease fiscal constraints by providing resources to the budget and funding for the National Development Plan. Strengthening the international cooperation will provide the country will highly needed FX and help covering the large BOP financing needs.	Continue improving the political and social situation; facilitate the return of refugees. Transparency and accountability in economic policies especially on the public spending side. *Not delaying essential structural reforms where profound disequilibrium/distortions have been identified.

Source of Risks	Likelihood	Expected Impact on Economy	Policy Response
Conjunctural shocks and scenarios
*War in Ukraine leads to escalation of sanctions and other disruptions*.	High	High. The continuation of the conflict would have strong negative impacts on economic activity especially on most vulnerable population.	Accelerate and strengthen discussions with donor community. Promote pro-growth and pro-poor fiscal consolidation. Accelerate negotiations with mining companies to brush up exports.
Rising and volatile food and energy prices.	High	High. The increase in food and energy prices following the geopolitical situation might cause a deterioration of the terms of trade for net importers countries like Burundi. Given the relative low level of official reserves, the country might go through some shortages on food and energy products.	Reform of monetary and exchange rate policy. Develop and strengthen domestic subsistence agriculture and food industry.
*Widespread social discontent and political instability.*	High	High. General social unrest would disrupt economic activities and reduce investors’ confidence. Increased pressures on fiscal expenditures (including military spending) would divert resources away from growth-enhancing spending, lowering growth.	Support the vulnerable population with well-targeted measures. Assuming the turbulence is temporary, use fiscal space and monetary policy prudently to support the economy.
Abrupt growth slowdown in China.	Medium	High. Economic slowdown in China will likely have a strong impact on Burundi’s external sector. As one of the main trade partners of Burundi, lower trade with China will result in probable decrease in commodity prices, lower FDIs and delayed infrastructure projects.	Encourage diversification of trade and economic partners. Policies to lower exports concentrations.
Outbreaks of lethal and highly contagious COVID-19 variants lead to subpar/volatile growth, with increased divergence across countries.	Medium	High. The eruption of a new lethal and contagious Corona virus variant would have strong impact on Burundi’s economy through the fall in commodity prices (which are currently on a recovering path e.g., coffee, tea, gold), worsening fiscal situation and a decelerating economic activity.	Accelerate vaccine rollout. Strengthen spending in health sector. Prudent fiscal policy and save resources where possible.
De-anchoring of inflation expectations in the U.S. and/or advanced European economies.	Medium	High. If the trend of rising global inflation is confirmed, the impact on the external sector could be large and has negative effects on growth prospects as FX is critically low. The risk of capital outflows from Burundi looks minor as the country mostly relies on concessional financing.	Increase production in the subsistence agriculture by enlarging cultivated lands and developing the local production inputs (e.g., fertilizers). Accelerate reengagement with donor community and prioritize concessional financing.
Structural Risks
Geopolitical tensions and de-globalization.		Medium. The higher commodity prices could boost commodity exports and support economic growth and reserve build up. Disorderly migration and lower confidence could lead to high public spending on refugees and lower private consumption and investment.	Increase fiscal space through stronger revenue administration and spending framework to better support unforeseen spending obligations. Increase international reserve buffers with a more flexible exchange rate to provide an adequate response to foreign exchange needs of the economy. Implement a more accommodative monetary policy if inflation is in check.
Cyberthreats.	Medium	Low. Global information infrastructure failure will probably have minor impact on Burundi’s economy as the economy does not rely much on private and speculative financial flows.	Increase IT infrastructure development and other cybersecurity measures.
Natural disasters related to climate change.	Medium	Medium. The lower performance of the weather-dependent agricultural sector will significantly weaken growth and exports (coffee and tea). Inflation would rise mainly because of the higher cost of food items.	Increase fiscal space through domestic revenue mobilization measures and spending prioritization and efficiency. Support the most vulnerable sectors and population. Tighten monetary policy to limit second-round inflationary pressures. Strengthen the business environment to further diversify exports and the economy.
Domestic Risks
Adverse weather conditions.	Medium Short Term	High. This would lead to lower agricultural production and slower growth, an increase in food inflation, pressures on public spending and the current account, and adversely affect the vulnerable households.	Guard against second-round effects on inflation. Use targeted programs to help vulnerable groups and reprioritize spending.
*A deterioration of the political and security situation.*	Medium Short to Medium Term	Medium. General social unrest would disrupt economic activities and reduce investors’ confidence. Increased pressures on fiscal expenditures (including military spending) would divert resources away from growth-enhancing spending, lowering growth.	Allow automatic fiscal stabilizers to operate. Support the vulnerable population with well-targeted measures. *Assuming the turbulence is temporary, use fiscal space and monetary policy prudently to support the economy.
*Reengagement with the international community*.	High	High. Increased support from the international community will ease fiscal constraints by providing resources to the budget and funding for the National Development Plan. Strengthening the international cooperation will provide the country will highly needed FX and help covering the large BOP financing needs.	Continue improving the political and social situation; facilitate the return of refugees. Transparency and accountability in economic policies especially on the public spending side. *Not delaying essential structural reforms where profound disequilibrium/distortions have been identified.

Annex IV. Capacity Development Strategy

A. Capacity Development Strategy

1. Capacity Development (CD) for Burundi would focus in the near term on strengthening fiscal operations and policy design; supporting the transition to a unified exchange rate (ER), coherent ER policy, and efficient post-unification monetary policy framework; fostering financial sector stability; strengthening data transparency by implementing the enhanced General Data Dissemination System (e-GDDS); and improving data timeliness and quality, especially fiscal, external and national accounts statistics; and reducing corruption vulnerabilities and corresponding governance weaknesses. These areas are supported by the IMF’s surveillance and CD operations in Burundi. Priority areas would include:

i. Fiscal operations and policy design:
- Revenue administration: strengthening of core functions and modernization, including through digitalization;
- Tax policy: general review of the tax system, including mining taxation, to rationalize, enhance efficiency, and simplify while proposing areas to strengthen collection and widen the tax base;
- Public finance management (PFM): strengthening of the budget process (preparation, formulation, execution, reporting and auditing); introduction of medium-term budgeting; and strengthening of the PFM framework to facilitate identification and follow up of pending bills and arrears; strengthening of public investment management, cash management and the operationalization of the Treasury Single Account (TSA); and strengthening of the macroeconomic projection model and fiscal risks analysis.
- Expenditure policy: enhance spending composition and efficiency.
ii. Exchange rate policy:
- Unification of the official and parallel exchange rates;
- Transition to an appropriate post-unification ER policy and FX intervention policy;
- FX market reform: liberalization, setting up an auctioning system.
iii. Monetary policy:
- Transition to an appropriate post-unification monetary policy framework (MPF);
- Strengthening monetary policy (MP) efficiency, including the design and use of standards MP instruments and elaborating a communication strategy;
- Preparing for the Eastern African Community (EAC)’s medium-term goal of a price-based MPF.
iv. Financial sector stability:
- Strengthening the supervisory frameworks (for banks and non-banks);
- Regulatory framework: transition to new standards
v. Debt management:
- Improving the quality of debt data;
- Building capacity to undertake a comprehensive analysis of the existing debt portfolio in terms of cost and risk;
- Enhancing debt monitoring and reporting;
- Domestic market development and strengthening of cash management; and
- Elaboration of a medium-term debt strategy addressing all relevant dimensions, including maturity, investor’s base, currency composition, cost optimization,
vi. Statistics: implementing the e-GDDS recommendations and publishing macroeconomic and financial data essential for surveillance and policy analysis through a National Summary Data Page (NSDP); improving the timeliness, quality, and coverage of
- National accounts;
- External sector statistics;
- Government finance statistics and fiscal reporting;
- Financial soundness indicators;
- Monetary and financial statistics;
- Debt statistics, including debt of publicly-owned enterprises, the local government, and the private sector, as well as the reporting of contingent liabilities.
vii. Governance:
- Strengthening the Legal and Organizational Framework for addressing corruption based upon an identification of anticorruption priorities.
- Improving the effectiveness of the AML/CFT framework in line with international standards.

B. Recent CD Activities

Revenue Administration

2. Recent CD missions have mainly been conducted from AFRITAC-Centre (AFC) and supported both customs and tax administrations.

3. CD missions on customs administration have aimed at strengthening its main functions, notably audit and control programs against smuggling, customs valuation procedures and risk-based controls procedures. Recent CD has been delivered through a regional seminar (January 2020), and standard CD missions (December 2019, October 2020, and November 2021). CD missions on tax administration have aimed at strengthening its main functions, notably the integrity of the tax base and the taxpayer registry, audit and control programs and the management of tax arrears. Support has also been given to strengthen and modernize the institutional management and governance framework of revenue administration. Recent CD has been delivered through a regional seminar (January 2020). A remote mission was also conducted during October-November 2020 to: (i) assess the impact of the measures taken to deal with the COVID-19 crisis; (ii) propose revenue safeguard measures; and (iii) support the digitization of procedures, including the implementation of innovative tools for reporting and payment of duties and taxes.

4. FAD and AFC a diagnostic mission, which was scheduled for April 28-May 17, 2022, was postponed to September 2022 at the authorities’ request. It will review all areas of fiscal reform (revenue administration, tax policy, public financial management, and debt management). FAD also plans to station a long-term fiscal expert in Burundi in the fall of 2022 to support the authorities’ fiscal reforms.

Tax Policy

5. No recent CD mission on tax policy has been conducted by the Fund. FAD is currently considering a diagnostic mission on the tax system at the authorities’ request. If approved, it could take place in FY2022/23.

Public Financial Management

6. Recent CD missions have mainly been conducted from AFC. Key objectives have been to: (i) improve budget preparation to make it more detailed, credible, and based on policies; (ii) strengthen the legal and institutional framework for public finances; (iii) strengthen identification, tracking and the management of fiscal risks; (iv) improve management of assets and liabilities; and (v) improve the coverage and quality of financial reports.

7. Recent CD has mainly been delivered through regional seminars (May, June, August and December 2019, February, and March 2020). A recent CD mission was conducted to support program budgeting (January 2022).

8. FAD and AFC are planning a diagnostic mission for April 28-May 17, 2022, at the authorities’ request.

Debt Management

9. A CD mission to strengthen public debt reporting practices is planned in FY2023. Financial supervision and stability

10. In recent years, the BRB has received several CD missions mostly pertaining to financial sector supervision and stability. These CD missions have mostly been conducted by AFC.

11. CD missions on financial stability aimed at strengthening BRB’s capacities in terms of financial supervision, risk and underlying vulnerabilities assessment and consistency of regulations with the Basel 3 framework.

12. The BRB is striving to upgrade its supervisory processes to move towards a risk-based supervision framework. In December 2020, a CD mission drafted a methodological guidance about on-site control of operational risk management frameworks. In March 2021, another mission drafted a methodological guidance about on-site control of the accounting function and the data-quality frameworks. More recently during March-April 2022, a CD mission focused on providing BRB supervisors the necessary tools in order to be able to perform risk based on-site inspections of banking institutions aimed at assessing the adequacy and effectiveness of their credit risk management frameworks. CD assistance has also been provided on IFRS 9 implementation to upgrade prudential requirements on credit classification and provisioning of expected credit losses (February 22 – March 19, 2021).

13. On the identification of underlying vulnerabilities in the financial sector front, the AFC conducted a CD mission over January to March 2022 aiming at developing a draft Internal Capital Adequacy Assessment Process (ICAAP) regulation and a methodological tool for BRB supervisors supporting the assessment of the ICAAP. This CD mission gave the opportunity to train the BRB’s supervisors on the Basel II Pillar 2 approach, the ICAAP framework and the stress testing guidelines.

Statistics

14. The most recent CD mission on National Accounts, took place in July 2021. The mission conducted by STA, provided technical assistance to the Institut des Statistiques et Etudes Economiques du Burundi (ISTEEBU). A GDP rebasing exercise is ongoing, benefiting from technical assistance from AFRISTAT and financial support from the World Bank. ISTEEBU is planning to publish the rebased GDP estimates for both 2016 (new base year) and 2017 by end-2022. During the July 2021 mission, the preliminary rebased GDP estimates for the new base year (2016), compliant with the System of National Accounts 2008 (2008 SNA), were reviewed and recommendations to improve the quality of the supply and use tables (SUT) were made. The mission trained ISTEEBU staff in backcasting to compile the 2005–2015 estimates.

15. Moreover, two CD missions on national accounts were conducted by AFC in October 2020 and May 2021, providing an opportunity to re-engage with the authorities, as the previous mission on this topic had taken place in 2017. The October 2020 technical assistance mission focused mainly on the use of the available data sources for the GDP rebasing exercise and the implementation of methodological recommendations of the 2008 SNA. AFC and STA have also provided limited technical assistance on GDP rebasing and provided important recommendations to improve the quality of the SUT for the new base year (2016). These include the treatment of the final household consumption expenditure, the informal sector estimates as well as changes to the trade margins. The May 2021 technical assistance mission focused on the improvement and further development of the quarterly national accounts. The authorities were also invited to regional workshops organized by AFC and by ATI in collaboration with STA.

16. TA on the CPI (and other price statistics) is provided by the East African Community. The most recent mission, October 18–November 05, 2021, assisted ISTEEBU with preparing to update CPI weights.

17. Over the last two years, Burundi has received a number of CD activities in Government finance statistics (GFS). GFS compilers from Burundi attended a regional AFC GFS webinar in April 19–23, 2021. This was followed by a GFS TA/training mission in June 14–25, 2021, to support the adoption of the GFSM2014 framework; and a GFS TA mission in January- February 2022 to facilitate implementation of the framework.

18. A remote mission to assist the authorities to implement the e-GDDS and publish data essential for surveillance through an NSDP took place in March/April 2022.

Limited imports, including fuel imports, in 2021Q4 owing to limited FX reserves led to fuel shortages and a ban of the use of cycles in Bujumbura from March 2022 led to public transportation disruptions.

While remittances include money transfers from 2019 (STA CD mission of January 2020), informal flows are unaccounted for. Origin countries include Canada, the U.S., Belgium, and Sweden.

The parallel market is informal and deemed illegal since 2019.

A statistical adjustment (15 percent) was applied to credit growth to account for the reclassification of a bank—the Urban Housing Promotion Fund became the Burundi Housing Bank in 2021 and is now covered in the monetary survey.

The baseline assumes vaccine donations (Annex I) to cover 21 percent of Burundians.

COVID-related spending is not itemized, see Tables 2a and 2b. Staff estimates that about US$ 42 million (1.3 percent of GDP) has been spent on the COVID response plan by end-December 2021.

Manufacturing production will be boosted by ongoing import substitution policies (cement and fertilizer factories) and stronger food and beverage production, supported by bank credit.

Several hydroelectric dams are in train, financed with European, Chinese and IDP funds and a World Bank solar project began in 2021 (combined cost of US$600 million). Three of these projects should start production by 2022 and three others during 2023–25. Power line and road projects are funded by the AfDB ($100 million).

A new financing agreement was signed with the U.S. (US$ 400 million over five years), reflecting the lifted sanctions.

Absent external shocks, inflation has been mostly driven by agricultural product supply. Inflation averaged 3 percent during 2015–20.

The authorities estimate trade credits, in the absence of recent enterprise, customs, and commercial bank surveys, and believe that the estimates are optimistic as operators might use other channels than swift (e.g., their FX accounts abroad), to circumvent FX shortages.

On March 29, 2022, an agreement was signed between the Ministry of Energy and the East African Projects Group for a nickel exploitation project, including equity deposit of US$ 500 million.

Burundi’s de jure exchange rate arrangement is floating, and its de facto exchange rate arrangement is crawl-like.

With an initial budgeted increase of 0.5 percent of GDP in 2021/22 (salary increase of previously discriminated civil servants).

In FY2020/21, capital spending represented 25 percent of total spending.

A bank can restructure a loan up to three times. A fourth restructuring requires the BRB’s agreement.

The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path. The relative likelihood is the staff’s subjective assessment of the risks surrounding the baseline (“low” is meant to indicate a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent). The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly. The conjunctural shocks and scenario highlight risks that may materialize over a shorter horizon (between 12 to 18 months) given the current baseline. Structural risks are those that are likely to remain salient over a longer horizon.

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Burundi: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Burundi

Author:

International Monetary Fund. African Dept.

Volume/Issue:: Volume 2022: Issue 257

Publisher:: International Monetary Fund

ISBN:: 9798400219122

ISSN:: 1934-7685

Pages:: 98

DOI:: https://doi.org/10.5089/9798400219122.002

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^{Figure 1.}

Burundi: Recent Developments, 2014–22

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^{Figure 2.}

Burundi: Recent Monetary Developments, 2011–22

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^{Figure 3.}

Burundi: Fiscal Developments, 2014–21^¹

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^{Figure 4.}

Burundi: Banking Sector Key Indicators and Trends, 2011–21

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^{Figure 5.}

Burundi: Growth Developments, 2000–26

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^{Figure 6.}

Burundi: Selected Social Indicators, 2010–20

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Burundi: Real GDP Growth Projections and Sector Contributions, 2021

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Burundi: Debts Sustainability Analysis Indicators

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Burundi: Public Investment in Burundi and Peer Countries, 2010–26

(Percent of GDP)

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^{Figure A1.1.}

Burundi: New Confirmed COVID-19 Cases, 2020–22

(Daily Confirmed Cases, 7 Day Moving Average)

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^{Figure A1.2.}

Burundi: COVID-19 Cases and Testing

(Per 1 million population)

Foresee

Source of Risks	Likelihood	Expected Impact on Economy	Policy Response
Conjunctural shocks and scenarios
*War in Ukraine leads to escalation of sanctions and other disruptions*.	High	High. The continuation of the conflict would have strong negative impacts on economic activity especially on most vulnerable population.	Accelerate and strengthen discussions with donor community. Promote pro-growth and pro-poor fiscal consolidation. Accelerate negotiations with mining companies to brush up exports.
Rising and volatile food and energy prices.	High	High. The increase in food and energy prices following the geopolitical situation might cause a deterioration of the terms of trade for net importers countries like Burundi. Given the relative low level of official reserves, the country might go through some shortages on food and energy products.	Reform of monetary and exchange rate policy. Develop and strengthen domestic subsistence agriculture and food industry.
*Widespread social discontent and political instability.*	High	High. General social unrest would disrupt economic activities and reduce investors’ confidence. Increased pressures on fiscal expenditures (including military spending) would divert resources away from growth-enhancing spending, lowering growth.	Support the vulnerable population with well-targeted measures. Assuming the turbulence is temporary, use fiscal space and monetary policy prudently to support the economy.
Abrupt growth slowdown in China.	Medium	High. Economic slowdown in China will likely have a strong impact on Burundi’s external sector. As one of the main trade partners of Burundi, lower trade with China will result in probable decrease in commodity prices, lower FDIs and delayed infrastructure projects.	Encourage diversification of trade and economic partners. Policies to lower exports concentrations.
Outbreaks of lethal and highly contagious COVID-19 variants lead to subpar/volatile growth, with increased divergence across countries.	Medium	High. The eruption of a new lethal and contagious Corona virus variant would have strong impact on Burundi’s economy through the fall in commodity prices (which are currently on a recovering path e.g., coffee, tea, gold), worsening fiscal situation and a decelerating economic activity.	Accelerate vaccine rollout. Strengthen spending in health sector. Prudent fiscal policy and save resources where possible.
De-anchoring of inflation expectations in the U.S. and/or advanced European economies.	Medium	High. If the trend of rising global inflation is confirmed, the impact on the external sector could be large and has negative effects on growth prospects as FX is critically low. The risk of capital outflows from Burundi looks minor as the country mostly relies on concessional financing.	Increase production in the subsistence agriculture by enlarging cultivated lands and developing the local production inputs (e.g., fertilizers). Accelerate reengagement with donor community and prioritize concessional financing.
Structural Risks
Geopolitical tensions and de-globalization.		Medium. The higher commodity prices could boost commodity exports and support economic growth and reserve build up. Disorderly migration and lower confidence could lead to high public spending on refugees and lower private consumption and investment.	Increase fiscal space through stronger revenue administration and spending framework to better support unforeseen spending obligations. Increase international reserve buffers with a more flexible exchange rate to provide an adequate response to foreign exchange needs of the economy. Implement a more accommodative monetary policy if inflation is in check.
Cyberthreats.	Medium	Low. Global information infrastructure failure will probably have minor impact on Burundi’s economy as the economy does not rely much on private and speculative financial flows.	Increase IT infrastructure development and other cybersecurity measures.
Natural disasters related to climate change.	Medium	Medium. The lower performance of the weather-dependent agricultural sector will significantly weaken growth and exports (coffee and tea). Inflation would rise mainly because of the higher cost of food items.	Increase fiscal space through domestic revenue mobilization measures and spending prioritization and efficiency. Support the most vulnerable sectors and population. Tighten monetary policy to limit second-round inflationary pressures. Strengthen the business environment to further diversify exports and the economy.
Domestic Risks
Adverse weather conditions.	Medium Short Term	High. This would lead to lower agricultural production and slower growth, an increase in food inflation, pressures on public spending and the current account, and adversely affect the vulnerable households.	Guard against second-round effects on inflation. Use targeted programs to help vulnerable groups and reprioritize spending.
*A deterioration of the political and security situation.*	Medium Short to Medium Term	Medium. General social unrest would disrupt economic activities and reduce investors’ confidence. Increased pressures on fiscal expenditures (including military spending) would divert resources away from growth-enhancing spending, lowering growth.	Allow automatic fiscal stabilizers to operate. Support the vulnerable population with well-targeted measures. *Assuming the turbulence is temporary, use fiscal space and monetary policy prudently to support the economy.
*Reengagement with the international community*.	High	High. Increased support from the international community will ease fiscal constraints by providing resources to the budget and funding for the National Development Plan. Strengthening the international cooperation will provide the country will highly needed FX and help covering the large BOP financing needs.	Continue improving the political and social situation; facilitate the return of refugees. Transparency and accountability in economic policies especially on the public spending side. *Not delaying essential structural reforms where profound disequilibrium/distortions have been identified.

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Abstract

Context

Recent Macroeconomic Developments

Outlook and Risks

Authorities’ Views

Policy Priorities

Creating Fiscal Space for Priority Spending

Authorities’ Views

Enroute for Exchange Rate Unification

Ensuring External Sustainability

Authorities’ Views

Monetary Policy Challenges and Framework

Authorities’ Views

Fostering Financial Sector Stability

Authorities’ Views

Unlocking Sustainable Inclusive Growth

Authorities’ Views

Other Issues

Staff Appraisal

Annex I. The COVID-19 Pandemic and The Authorities’ Response

Annex II. External Sector Assessment

Annex III. Risk Assessment Matrix1

Annex IV. Capacity Development Strategy

A. Capacity Development Strategy

B. Recent CD Activities

Revenue Administration

Tax Policy

Public Financial Management

Debt Management

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Annex III. Risk Assessment Matrix^¹