Burundi Economic Outlook
- Burundi achieved average annual growth of 4% between 2010 and 2014, but due to the social and political environment in 2015, the growth rate fell and GDP is estimated to have dropped by 4.1%.
- The deterioration in public finances led to large-scale recourse to advances from the central bank (Banque de la République du Burundi) to finance the budget deficit in 2015.
- Continuation of the current socio-political climate and the accompanying fall in support from donors could do serious damage to the country’s remarkable advances in development and poverty reduction since 2005.
The socio-political strains from which Burundi has suffered since April 2015 have created major difficulties for economic activity, which has slowed markedly, interrupting the growth dynamic of the start of this century. Latest estimates suggest that growth of real gross domestic product (GDP) was negative, at around -4.1% in 2015 as against 4.7% in 2014 and 4.5% in 2013. This contraction was chiefly the consequence of a drop in activity in the secondary sector, in particular in industry and construction. Inflation remained steady at an average 5.5% in 2015, compared with 4.4% in 2014, thanks to the relative stability of the exchange rate, good harvests and the continuing drop in international oil prices. In respect of the budget, Burundi continues to suffer from a weak mobilisation of internal resources (11.7% of GDP in 2015 compared with 12.9% in 2014 and 13.1% in 2013) and from a substantial fall in foreign aid (-33% in 2015), according to the Finance Ministry. The budget deficit rose from 1.2% of GDP in 2014 to 5.7% in 2015. The deterioration in the public finances was strongly reflected in the accounts of the central bank (BRB), in particular with a steep fall in the official reserves (less than two months of import cover in 2015, compared with four months in 2014), mainly because of broad government recourse to BRB advances to finance the deficit. This financing, which amounts to an injection of liquidity into the economy, resulted in a greater demand for foreign exchange. The current account deficit, transfers included, is estimated at 4.5% of GDP in 2015 compared with 9.5% of GDP in 2014.
The implementation of the second-generation strategic framework for growth and poverty reduction, adopted in February 2012, brought significant progress in human development. The present political context, however, could call into question much of what has been achieved. The prolonged absence of support from technical and financial partners has negative consequences for the country and risks endangering the progress that has been made, particularly in social dimensions. Renewed engagement by these participants is largely dependent on a political solution to political tensions, which would make it possible to avoid an even more serious deterioration in the socio-economic situation. The whole international community is worried by the persistent tensions in the country, which also carry risks for the entire sub-region. Several Western countries have already announced the suspension of support to Burundi. Furthermore, the problems observed in 2015 surrounding the implementation of reforms supported by the extended credit facility (ECF) could also have a negative impact on the budget in the short and medium term.