IMF Staff Concludes Visit to Burundi

“On July 17, 2023, the Executive Board of the International Monetary Fund
(IMF) approved a 38-month arrangement under the

Extended Credit Facility (ECF)

with access of SDR 200.2 million (or about US$ 261.7 million, representing
130 percent of quota).

“Discussions held during the mission covered recent macroeconomic and
policy developments, progress towards reform implementation under the
ECF-supported program, and near-term macroeconomic prospects and policy
plans.

“Economic growth is expected to slightly accelerate in 2023 (from 1.8
percent in 2022), driven by the secondary and tertiary sectors, as the
Burundian economy continues to recover. However, shocks slowed down the
recovery. Notably, rain delays and structural challenges at the end of 2022
impacted the first agricultural season of 2023. Commerce and in-country
distribution of agricultural products were disrupted by domestic fuel
shortages as limited foreign exchange (FX) availability compounded high
fuel import prices and supply chain issues. Increases of pump prices in
July and September and fuel import volume helped reach cost-recovery
pricing and tame shortages. Inflation pressures have continued with average
inflation standing at around 29 percent during January−August 2023, driven
mainly by food prices, despite easing somewhat during March−July. The
beneficial effects of the new agricultural harvest on food prices were
outweighed by high import prices owing to the war in Ukraine and domestic
factors.

“External sustainability remains a pressing challenge.
The current account deficit is projected to remain
large (15.6 percent of GDP in 2022).Foreign currency reserves have
continued to decline, reaching US$ 59.7 million (about 0.5 month of
imports) in mid-September (from 1.3 months of imports at end-March 2023),
driven by the import bill and delayed gold sales. Strong remittance inflows
and the IMF’s first ECF disbursement have provided a cushion.

“The 38-percent nominal ER depreciation operated by the central bank on May
4, 2023 temporarily reduced the parallel ER market premium
. However, from about 42 percent on May 4, the parallel ER market
premium has widened since (about 57.4 percent in end-September).
The financial sector shows resilience.

“With the support of the new ECF arrangement, the Burundian authorities
have committed to a broad-based macroeconomic reform agenda aimed at
tackling key challenges.

• “Resuming pro-growth
  
  fiscal consolidation to support debt sustainability while
  protecting the vulnerable population.
  
  The fiscal deficit is estimated to have widened substantially in
  FY2022/23 (June−July) compared to FY2021/22 (7 percent of GDP), driven
  mainly by salaries, subsidies, and accelerated investment scaling up. A
  return to fiscal consolidation is planned under the program starting in
  FY2023/24, building on strengthened revenue collection efforts and
  current…