Burundi’s economy has shown resilience to the COVID-19 and Ukraine war shocks. Prior to the pandemic, the economy was recovering from the political and security crisis that followed late President Nkurunziza’s decision to run for a third term in 2015, with growth close to 2 percent in 2019. Difficult macroeconomic policy challenges persisted, nevertheless. The pandemic has taken a toll on the post-conflict fragile country, but COVID-19 contagion remained fairly contained and growth was positive. The war in Ukraine is compounding the adverse effects of the pandemic, with deteriorating terms of trade and the resulting domestic inflation threatening already-challenging living standards. Sanctions from the U.S. and E.U.—legacy of the 2015 crisis—have now been lifted. The U.N. Security Council ended mandatory reporting in Burundi and the country has reengaged with the international community. The 2022 Article IV consultation seals the full reengagement with the IMF—the last one was concluded in 2014.
Burundi is a fragile state with a history of political tensions and weak institutions. Before the Covid-19 pandemic, Burundi was recovering from an economic recession triggered by the 2015 political crisis stemming from the late President Nkurunziza’s decision to run for a third term. Real GDP growth was positive, at 1.8 percent in 2019, but difficult policy challenges persisted.
International Monetary Fund. Office of Budget and Planning
Amidst the unfolding COVID-19 crisis, the Fund faces twin challenges. Signs of early crisis recovery are uneven across countries, and many face daunting crisis legacies. At the same time, longer term challenges from climate change, digitalization and increasing divergence within and between countries demand stepped up effort by the Fund within its areas of expertise and in partnership with others. FY 22-24 budget framework. Considering these challenges and following a decade of flat real budgets, staff will propose a structural augmentation for consideration by fall 2021 to be implemented over two to three years beginning in FY 23. Recognizing the importance of ongoing fiscal prudence, the budget would remain stable thereafter on a real basis at a new, higher level. FY 22 administrative budget. The proposed FY 22 budget sustains crisis response and provides incremental resources for long-term priorities within the flat real budget envelope. The budget is built on extensive reprioritization; savings, including from modernization; and a proposed temporary increase in the carry forward ceiling to address crisis needs during the FY 22 to FY 24 period. Capital budget. Large-scale business modernization programs continue to be rolled out, strengthening the agility and efficiency of the Fund’s operations. In response to the shift towards cloud-based IT solutions, staff propose a change in the budgetary treatment of these expenses. Investment in facilities will focus on timely updates, repairs, and modernization, preparing for the post-crisis Fund where virtual engagement and a new hybrid office environment play a larger role. Budget sustainability. The FY 22–24 medium-term budget framework, including assumptions for a material augmentation, is consistent with a projected surplus in the Fund’s medium-term income position and with continued progress towards the precautionary balance target for coming years. Budget risks. In the midst of a global crisis, risks to the budget remain elevated and above risk acceptance levels, including from uncertainty around the level of demand for Fund programs and ensuing staffing needs, as well as future donor funding for CD. Enterprise risk management continues to be strengthened with this budget.
Mr. Paulo Drummond, Mr. Ari Aisen, Mr. Emre Alper, Ms. Ejona Fuli, and Mr. Sébastien Walker
This paper examines how susceptible East African Community (EAC) economies are to asymmetric shocks, assesses the value of the exchange rate as a shock absorber for these countries, and reviews adjustment mechanisms that would help ensure a successful experience under a common currency. The report draws on analysis of recent experiences and examines likely future changes in the EAC economies.
Mr. Paulo Drummond, Mr. S. K Wajid, and Mr. Oral Williams
The countries in the East African Community (EAC) are among the fastest growing economies in sub-Saharan Africa. The EAC countries are making significant progress toward financial integration, including harmonization of supervisory arrangements and practices and the modernization of monetary policy frameworks. This book focuses on regional integration in the EAC and argues that the establishment of a time table for the eliminating the sensitive-products list and establishing a supranational legal framework for resolving trade disputes are important reforms that should foster regional integration.
International Monetary Fund. Monetary and Capital Markets Department
This is the 65th issue of the AREAER. It provides a description of the foreign exchange arrangements, exchange and trade systems, and capital controls of all IMF member countries. It also provides information on the operation of foreign exchange markets and controls on international trade. It describes controls on capital transactions and measures implemented in the financial sector, including prudential measures. In addition, it reports on exchange measures imposed by member countries for security reasons. A single table provides a snapshot of the exchange and trade systems of all IMF member countries. The Overview describes in detail how the general trend toward foreign exchange liberalization continued during 2013, alongside a strengthening of the financial sector regulatory framework. A Special Topic essay examines the dynamics and evolution of capital flows. The AREAER is available in several formats. The Overview in print and online, and the detailed information for each of the 191 member countries and territories is included on a CD that accompanies the printed Overview and in an online database, AREAER Online. In addition to the information on the exchange and trade system of IMF member countries in 2013, AREAER Online contains historical data published in previous issues of the AREAER. It is searchable by year, country, and category of measure and allows cross country comparisons for time series.
The Burundian economy faced several adverse shocks. The government responded by allowing greater exchange rate flexibility and by tightening its monetary policy. The fiscal stance was in line with the program, and program implementation has been broadly satisfactory despite difficult circumstances. Sustaining revenue mobilization remains a top priority. Public financial management needs to be bolstered significantly and the country remains at high risk of debt distress, underscoring the importance of reinforcing debt management. Monetary policy should remain tight until inflation falls.
Mr. Hamid R Davoodi, S. V. S. Dixit, and Gabor Pinter
Do changes in monetary policy affect inflation and output in the East African Community (EAC)? We find that (i) Monetary Transmission Mechanism (MTM) tends to be generally weak when using standard statistical inferences, but somewhat strong when using non-standard inference methods; (ii) when MTM is present, the precise transmission channels and their importance differ across countries; and (iii) reserve money and the policy rate, two frequently used instruments of monetary policy, sometimes move in directions that exert offsetting expansionary and contractionary effects on inflation—posing challenges to harmonization of monetary policies across the EAC and transition to a future East African Monetary Union. The paper offers some suggestions for strengthening the MTM in the EAC.
Le Burundi est l’un des pays les plus pauvres au monde. Le PIB par habitant est d’environ 255 dollars et plus de deux tiers de la population vit en-dessous du seuil de la pauvreté. Le pays progresse vers les objectifs du Millénaire pour le développement (OMD) mais les probabilités de les atteindre d’ici 2015 restent limitées.