A stronger financial restoration is projected for 2024, with actual GDP increasing by 4.3 p.c pushed by agricultural manufacturing, funding, and reforms; rebounding from the estimated 2.7 p.c progress in 2023; Just lately-adopted coverage adjustment measures, together with fiscal consolidation underneath the revised 2023/24 price range (July—June), financial coverage (MP) tightening, and overseas trade (FX) market liberalization are anticipated to assist macroeconomic sustainability. The parallel FX market premium decreased on Might 4, 2023 with the 38-percent depreciation of the official trade price (ER) operated by the central financial institution (Banque de la République du Burundi or BRB); nonetheless, it has been widening since then; Burundi’s reform program goals to assist financial restoration from the latest shocks, restore exterior sustainability, and strengthen debt sustainability, whereas creating fiscal house for accelerated and inclusive progress and fostering monetary sector resilience; Discussions on efficiency and insurance policies underpinning the primary assessment underneath the Prolonged Credit score Facility (ECF) association will proceed within the interval forward.
An Worldwide Financial Fund (IMF) staff led by Ms. Mame Astou Diouf, Mission Chief for Burundi, visited Bujumbura throughout January 11−21, 2024 to carry discussions with the Burundian authorities for the primary assessment underneath the Prolonged Credit score Facility (ECF) Association authorized on July 17, 2023 (see PR No. 23/266). On the finish of the go to, Ms. Diouf issued the next assertion:
“The mission centered on efficiency and insurance policies underpinning the primary assessment of the 38-month association underneath the ECF. Discussions coated latest macroeconomic and coverage developments, program efficiency, and near-term prospects and coverage plans.
“Financial progress recovered to 2.7 p.c in 2023 (from 1.8 p.c in 2022). Comparatively weak financial exercise within the first quarter of 2023 and home gasoline shortages constrained the restoration, mitigated by agricultural manufacturing rebound throughout the remainder of 2023, public funding, and banking actions. Development is projected to speed up to 4.3 p.c in 2024, supported by robust agricultural manufacturing, productive funding, and the continuing reforms. Will increase of pump costs and better gasoline import quantity helped attain cost-recovery pricing to include implicit gasoline subsidies and reduce gasoline shortages. Whereas inflation pressures have been excessive in 2023, with common inflation estimated at round 27 p.c, they’ve began receding for the reason that final quarter of the 12 months. Common inflation is projected to lower to round 22 p.c in 2024.
“Exterior sustainability stays difficult. The present account deficit remained massive in 2023 (13.3 p.c of GDP) whereas FX reserves are low ($96.4 million or 0.8 month of imports at end-2023), owing to the excessive import invoice. Robust remittance inflows, gold exports, the IMF’s first ECF disbursement and different donor financing have helped relieve pressures.
“The 38-percent depreciation of the official ER operated by the BRB on Might 4, 2023 briefly diminished the parallel FX market premium (about 40 p.c on Might 4). Nonetheless, the premium has widened since then, just lately hovering past 55 p.c. The monetary sector has proven resilience.
“The Burundian authorities’ reform agenda underneath the ECF association encompasses a broad-based macroeconomic coverage recalibration aimed toward tackling key challenges.
“ Resuming pro-growth fiscal consolidation to assist debt sustainability whereas defending residing requirements. At end-December 2023, the authorities adopted a revised 2023/24 price range aimed toward robust fiscal consolidation primarily via robust home income mobilization efforts, chopping or rephasing of public funding to extra sustainable ranges than deliberate underneath the unique price range, and different spending financial savings, whereas preserving social spending. Larger donor financing, catalyzed by the ECF program, may also assist consolidation. Public debt to GDP is anticipated to say no over the medium time period.
“Exterior coverage rebalancing and unwinding financial financing. The authorities have devised a roadmap in the direction of exterior sustainability. They just lately adopted a brand new FX market regulation and several other market liberalization measures together with: (i) gold sector liberalization per the brand new mining code; (ii) permitting the personal sector to switch repatriated export proceeds to industrial banks (CBs), together with for mining exports; and (iii) transferring non-governmental group accounts from the BRB to CBs. The BRB plans to intently monitor the effectiveness of those measures in bettering FX market liquidity situations.
“Agile financial coverage. Whereas the financial coverage (MP) tightening began in 2023 has helped ease inflation pressures, additional tightening could also be wanted. The modernization of the MP framework, together with the adoption of a coverage price and quarterly press releases, is anticipated to enhance MP transmission. Limiting financial financing will assist inflation easing and exterior coverage recalibration efforts.
“Governance and structural reforms will guarantee a enterprise surroundings conducive to personal sector-led, job-rich, and inclusive progress.
“The mission additionally reviewed program efficiency and coverage implementation. Quantitative targets for end-July and end-September 2023 have been broadly met, with challenges largely associated to financial financing and FX shortage. Income assortment and execution of social spending have been robust. Discussions on the primary assessment of the ECF association will proceed within the interval forward with the purpose of reaching an settlement on insurance policies and program targets that might assist a staff-level settlement for the completion of the assessment. The IMF stays dedicated to supporting the efforts of the Burundian authorities in reaching the goals underneath this system.
“The mission met with H.E. Prime Minister Gervais Ndirakobuca; H.E. Audace Niyonzima, Minister of Finance, Funds and Financial Planning (MFBPE); Mr. Edouard Normand Bigendako, Governor of the Banque de la République du Burundi; Ms. Francine Inarukundo, Everlasting Secretary of the MFBPE. The mission additionally met with different officers of the federal government and the BRB, in addition to representatives of the personal sector and donors.
“The mission want to take this chance to warmly thank the Burundian authorities for his or her nice hospitality and cooperation, in addition to open and productive discussions.”
Distributed by APO Group on behalf of Worldwide Financial Fund (IMF).
