IMF staff and Burundian authorities have reached a staff-level agreement on economic policies and reforms, which will be supported by a new 40-month Extended Credit Facility (ECF) arrangement worth approximately US$ 261.7 million. The agreement at the staff level is subject to IMF Management approval and consideration by the Executive Board. Burundi’s reform program aims to help the country’s economy recover from shocks, restore external sustainability, and strengthen debt sustainability, all while creating fiscal space for faster and more inclusive growth. Beyond a carefully calibrated macroeconomic policy mix, implementing growth- and governance-enhancing reforms while keeping an eye on financial sector vulnerabilities will be critical to addressing the multifaceted challenges.
An International Monetary Fund (IMF) team led by Ms. Mame Astou Diouf, Mission Chief for Burundi, visited Bujumbura in February 2012 and held follow-up virtual meetings on February 22 and April 6 to discuss IMF support for Burundi’s macroeconomic policies and reform plan with Burundian authorities.
Mme Mame Astou Diouf issued the following statement at the conclusion of the discussions:
“The Burundian authorities and the IMF staff team have reached a staff-level agreement on a 40-month arrangement under the Extended Credit Facility (ECF) with access to SDR 200.2 million (approximately US$ 261.7 million, representing 130 percent of quota).” This is the Fund’s first Upper Credit Tranche-quality program for Burundi since 2015. The program’s goal is to support a calibrated macroeconomic policy mix in order to restore external sustainability, strengthen debt sustainability, and support economic recovery from shocks while creating fiscal space for accelerated and inclusive growth. The agreement at the staff level is subject to IMF Management approval and consideration by the Executive Board.
“Discussions with Burundi’s authorities covered recent macro-developments, the impact of various domestic and external shocks, and Burundi’s macro-policy plans and structural reform agenda.”
“Several shocks have hit Burundi’s economy, halting its recovery from the negative effects of the COVID-19 pandemic and exacerbating its macroeconomic imbalances.” Agricultural production was hampered by delayed rainfall in the fourth quarter of 2022 and limited fertilizer availability, which was caused by higher prices in the context of limited foreign exchange (FX) availability for imports, supply disruptions linked to the Ukraine war, and insufficient domestic production to meet local farmers’ demand. Rift valley and porcine fever outbreaks harmed Burundi’s livestock production. Higher import prices caused by the Ukraine war have increased inflation, widened the fiscal deficit, and exacerbated current account (CA) pressures.
“Real GDP Growth is estimated to have slowed down to 1.8 percent in 2022 (from 3.1 percent in 2021) but is projected to rebound to 3.3 percent in 2023. Delayed harvest and lower crop of 2022 will impact agricultural production in 2023 owing to reduced land and seed availability.
“Inflation pressures have not receded. Inflation averaged 18.9 percent in 2022 and has continued accelerating (28.6 percent y/y at end-January 2023), driven by food prices. It is projected to remain high, at around 18 percent in 2023.
“With the support of the ECF arrangement, the Burundian authorities have planned a broad-based near- and medium-term macroeconomic reform agenda aimed at tackling key challenges:
“Resuming pro-growth fiscal consolidation to support debt sustainability while protecting the vulnerable population. The fiscal position is projected to weaken in FY2022/23 (July-June) because of slow revenue collection from measures adopted in the last two budget laws and spending overruns including large fertilizer subsidies. A return to fiscal consolidation is planned starting in FY2023/24, building on strengthened revenue collection efforts and current spending restraint while preserving social spending and efficient investment scaling up under the authorities’ Public Investment Plan (PIP). Public debt will be declining over the medium term under the program.
“External rebalancing and unwinding monetary financing. The central bank (BRB) is committed to recalibrating monetary and external policies to address the below-adequacy FX reserves (1.5 months of imports at end-2022) and large parallel FX market premium. In preparation for the external rebalancing, the BRB has initiated FX market liberalization and reduced financing provision to commercial banks. This will also help curb inflation pressures. Limiting BRB financing to the budget will also be essential.
“Governance and structural reforms will be at the core of the authorities’ medium-term program to ensure a business environment conducive to private-led diversified and inclusive growth and job creation.
“The mission met with H.E. Prime Minister Gervais Ndirakobuca, H.E. Audace Niyonzima, Minister of Finance, Budget and Economic Planning (MFBPE); Mr. Dieudonné Murengerantwari, Governor of the Bank of the Republic of Burundi (BRB); Mr. Désiré Musharitse, First Vice-Governor of the BRB; Ms. Francine Inarukundo, Permanent Secretary of the MFBPE. The mission also met with other officials of the government and the BRB, as well as representatives of commercial banks, the private sector, non-governmental organizations, and the donor community.
“The mission would like to take this opportunity to thank the Burundian authorities for their hospitality and cooperation, and fruitful and open discussions.