- Developments are going amazingly quick in Burundi, which is just putting more than a decade of warfare behind it. The brutal civil war let GDP per capita shrink to 65 percent of its 1992 peak, pushed 60 percent of the population into poverty and caused national debts to reach record heights. The new-won peace by now already is showing economic results, with over 6 percent growth projected for this year.
Burundi is looking to a brighter future as it works toward securing macroeconomic stability and implementing structural reforms to boost economic growth and reduce poverty, according to a new study by the International Monetary Fond (IMF) about the war-ravaged country. But governance and transparency need to be further strengthened, including through the progressive withdrawal of state intervention in the economy.
Burundi's institutional and productive capacity were severely undermined after decades of political instability and civil conflict, especially when a coup d'état erupted in 1993. But today, according to a recent IMF country study, Burundi is looking to a brighter future as it works toward securing macroeconomic stability and implementing structural reforms to boost economic growth and reduce poverty.
Between 1993 and 2005, real per capita income in Burundi dropped by almost half - to about US$ 110 a year - and the poverty rate reached almost 60 percent in 2001. According to the UN's Development Programme UNDP, Burundi is now one of the least developed countries in the world.
By 2000, financial imbalances had widened, the external debt had become unsustainable, and the state's heavy participation in the economy had severely weakened the productive sector, the Fund's publication 'IMF Survey' reported today. Total factor productivity declined steadily between 1993 and 2000, especially in agriculture, which accounts for roughly half of Burundi's GDP.
According to 'IMF Survey', the poor performance of public enterprises, exacerbated by falling international commodity prices in the late 1990s, led to large financial losses, external and domestic payments arrears, and de-capitalisation of crucial agricultural production in crops such as coffee, which accounts for 80 percent of exports. These losses worsened Burundi's fiscal situation, even as an accumulation of non-performing loans weakened the financial system.
In a new country report on Burundi, IMF Executive Directors recently commended Bujumbura authorities for their "progress in implementing the programme in 2005 in a difficult post-conflict environment."
"Good progress had been made in the fiscal, monetary, and foreign exchange areas, although reforms in the productive sectors, fundamental for a sustained recovery, had been delayed. They encouraged the authorities to proceed with structural reforms that would stimulate private sector activity, improve the business climate, and reactivate the privatisation agenda", says the IMF study.
The Fund welcomed Burundi's "strong fiscal and buoyant revenue performances, despite import duty reductions." To achieve further progress, however, the IMF urged that public expenditure management needed to be improved and budget execution, financial control, and public procurement practices to be reinforced.
Also governance and transparency needed to be "further strengthened," including through the progressive withdrawal of state intervention in the economy. Further recommendations included better banking supervision, laws against money laundering and granting independence to the Central Bank.
In line with progress and despite some shortcomings, the Fund was concluding with an optimistic short term economic outlook. Prospects for 2006 were for a rebound in growth and a further reduction in inflation. Burundian authorities and the IMF foresee over 6 percent GPD growth this year. Now was also the time to start spending more on "urgent social needs" while reducing the defence budget. Burundians thus could look forward to better times.
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