The International Monetary Fund (IMF) recently approved a $271 million Extended Credit Facility for Burundi, with an immediate disbursement of more than $62 million. According to the IMF, the loan facility would help address the country’s prolonged balance of payments needs, rebuild external buffers and support the government’s reform agenda. The latest financial assistance from the IMF would also enable Burundi’s government to take steps to reform its foreign exchange market, which could help replenish its international reserves if implemented.
The Burundian economy crumbled under severe political instability that lasted between 2015 to late 2020. The economy is recovering from years of civil and political instability triggered by the third-term bid of former President Pierre Nkurunziza. The late president was called the “Supreme Eternal Guide” by his party members. That was because his government drafted a new constitution that would bring him in a 4th and 5th term, each having a 7-year tenure.
Also, Burundi is one of the few African countries whose economy severely suffered the double damage of the COVID-19 pandemic and the impact of the ongoing Russian-Ukraine war. In July 2022, the IMF classified Burundi’s public debt as sustainable. However, its risk of external debt distress was high.
The country’s external imbalances were large, with reserve coverage below adequacy levels and a significant parallel exchange rate market premium. But an earlier assessment in 2021 by the IMF had concluded that the East African country’s economy showed resilience, with economic growth expected to strengthen in 2022 to at least 3%.
In April, the African Development Bank forecasted that the country’s real GDP would grow by 4.5% in 2023 and 4.6% in 2024 due to public investment in transportation and energy. Measures aimed at boosting agricultural production and stabilising the exchange rate are expected to reduce inflation, which is projected to drop to 10.3% in 2023 and 9.0% in 2024.
Before this latest IMF financing, the World Bank had hinted at the impact of new financial reforms on Burundi’s economic transformation. “… improving governance, ensuring macroeconomic stability, and introducing appropriate policy reforms in finance, trade, and agriculture will attract more private-sector investments to Burundi. This will boost job creation and livelihoods for Burundians across the country,” said Hawa C. Wague, World Bank Country Manager for Burundi.
Asides from Agriculture which serves as its key employer and foreign earner, Burundi has one of the largest global nickel reserves. About 6 % of the global nickel reserves are in Burundi, placing it on the top 10 list of countries having significant untapped deposits of nickel. But its mining sector is still underdeveloped and dominated by artisanal mining activities. More so, the energy deficit for the mining industry and the export of minerals out of landlocked Burundi pose serious challenges. Asides from nickel, other important moneral the country has include cassiterite, vanadium, gold, iron, phosphates, carbonates, platinoids and rare earths.
Despite the high involvement of crude miners in its mining sector, the country also has foreign players in its extractive industry. However, the government has complained of low revenue from foreign players. Thus, in 2021, the Burundian government suspended the operations of several international mining corporations as it did not receive a fair share of income from its mineral wealth. “British, Chinese, and Russian companies are among the seven firms affected by the decision. The key company among them is the British-listed Rainbow Rare Earths, which runs the Gakara project, Africa’s only rare earth element production in western Burundi,” wrote Turkish news agency, Anadolu Ajansi.
