- Economic growth is recovering in Burundi after years of civil war. Last year, GDP growth was at around 5.4 percent, and this is expected to increase somewhat in 2005. The Burundian economy however remains fragile, and suffered much from higher oil prices and a poor performance of the coffee sector in 2004.
These are the conclusions of the latest review of economic trends in Burundi by the International Monetary Fund (IMF). According to IMF Deputy Managing Director Agustín Carstens, Burundi in 2004 even had a "somewhat higher-than-expected real growth."
The slow recover of Burundi's economy is mostly due to the slowing down of military activities in the country. Despite a difficult political environment, the demobilisation process has now begun and the security situation has improved. Politically, the transition and peace process is moving ahead and there is now only one armed group not participating in this process.
Notwithstanding these broadly positive developments, according to Mr Carstens, "Burundi faces enormous challenges, including the need to complete the political transition and the demobilisation of armed combatants, to secure debt relief, and to address widespread poverty and work to meet the Millennium Development Goals."
Since January last year, the Burundian government is cooperating with the IMF on an economic growth and poverty reduction policy. In order to receive loans to finance this policy, Burundi has to accomplish structural adjustments to its economic policy. These include increasing fiscal revenues, focusing on social spending, liberalising the trade and monetary regime and privatising state companies.
According to the first IMF review of these reforms, the programme performance had been "mixed, owing to fiscal slippages and delays in implementing structural reforms." Nevertheless, the Fund today had decided to disburse another US$ 10.9 million of the so-called Poverty Reduction and Growth Facility (PRGF) arrangement, which will total US$105.6 million over three years.
Mr Carstens holds that Burundian fiscal slippages in 2004 had "reflected the adverse fiscal effects of the surge in petroleum prices and higher spending associated with the peace process, but also the need to cover higher coffee sector losses from budgetary resources." This, he said, was "underscoring the urgency of implementing the coffee reform strategy," which authorities had earlier agreed upon.
Burundi's 2005 budget envisages a reduction in the primary fiscal deficit and a further increase in social spending. Savings from reduced military spending are to be redirected to urgent social needs. Measures are also being taken to strengthen the management of public finances, notably through a new budget and accounts code and improved wage bill management.
According to the IMF, Burundi will need "appropriate and timely donor support" to be able to implement these efforts. Burundi's external debt burden at end-2003 was found to be "unsustainable", and the IMF urged the country's development partners to provide financial assistance "in the form of grants and/or highly concessional loans."
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