Burundi

Sustainable growth rebound driven by agricultural exports and mining sector recovery

The rebound in economic growth, which began in 2023, should continue and even gain momentum in 2024 and even more so in 2025, boosted by a general recovery in all sectors (agriculture, industry and services) and robust public spending. Despite being badly hit by the recurrent flooding along Lake Tanganyika (every year since 2019), agriculture (40% of GDP and 80% of employment in 2023) remains an essential component of economic development, driven by the robustness of coffee exports (19.1% of exports in 2023) and tea (9.2%), to a lesser extent, even though world prices are expected to remain at a comfortable level in 2025. The gradual revival of the mining sector, after several years in the doldrums, will also contribute to renewed growth, although for the moment only gold mining is prospering (34.8% of exports in 2023). Deemed disadvantageous by the state, the concessions of many foreign companies, suspended since 2021, are currently being renegotiated under the new Mining Code adopted in June 2023, which is more beneficial to public finances, with a view to the imminent resumption of mining of nickel deposits, rare earths and various other critical minerals that abound in Burundi's subsoil. Such a move will be accompanied by a resurgence in FDI (only 0.7% of GDP in 2023), mainly directed towards the extractive industries.

At the same time, strong public investment spending (12.5% of GDP in 2023) is making it possible to finance the construction of energy infrastructure (hydroelectric and solar power stations, cross-border interconnection of electricity grids) and to open up the country by modernising road (Burundi Transport Resilience Project) and the standard gauge railway (SGR) networks linking it to Tanzania, with the support of international donors such as the World Bank and the African Development Bank (AfDB). More generally, Burundi, one of the poorest countries in the world (62% of the population lives below the extreme poverty line), still relies heavily on international cooperation (9.3% of GDP in 2023) to ensure its development. Inflation, while on the decline, thanks to the fall in the price of oil, the main source of imports, will nevertheless remain high and will continue to weigh on household consumption. Against this backdrop, the Banque de la République du Burundi (BRB) is likely to maintain a restrictive monetary policy in 2025.

Slow recovery of twin deficits under IMF supervision

In 2025, Burundi intends to pursue its commitment to consolidating public finances, initially by increasing domestic revenues, through higher customs revenues from agricultural and mining exports, a broader tax base and modernisation of the VAT collection system. These efforts have been made in exchange for a payment of USD 271 million over 38 months (of which USD 62.6 million has been disbursed to date) under the IMF's Extended Credit Facility (ECF) in 2023, at a time when international budget support is generally increasing. However, public spending is also set to rise (by 16% for fiscal year 2024/2025) in the run-up to the next parliamentary elections, mainly due to the defreezing of civil servants' bonuses, suspended since 2016. Stable in absolute terms, the budget deficit as a percentage of GDP should nevertheless continue to decline, as should public debt, 29.5% of which is held by foreign creditors in 2023, whose weight in GDP should also lighten in 2025, supported by growth.

After the negative performance of 2024, the current account deficit will decline in 2025, albeit still at an extremely high level, thanks in large part to higher export revenues from agricultural and mining products, but also to lower prices for imported petroleum products. These developments are helping to reduce the massive structural imbalance in the balance of trade (-21.8% of GDP in 2023), which results from a manufacturing industry that is still in its infancy. Remittances from the diaspora and increased international cooperation will also help. In particular, the IMF programme, backed by contributions from other bilateral and multilateral development agencies, is enabling Burundi to meet its external supply needs, despite the fact that its foreign exchange reserves were equivalent to just 0.7 months of imports in December 2023 - well below the macroeconomic convergence criteria of the countries of the Economic Commission for Africa (ECA) - and that the shortage of foreign currency remains a major cause for concern. To remedy this, the reform of the exchange rate regime at the end of 2023, which was supposed to reduce the differential between the official exchange rate and the premium on the parallel market - the rate at which most goods are imported, with the exception of oil, medicines and fertilisers, the import of which remains controlled by the state (and de facto subsidised by the use of an artificial rate) - has proved only moderately effective. Although the premium receded in May 2023 following the BRB's 38% depreciation of the official exchange rate, it has since risen again (to 100% in May 2024).

Gradual restoration of relations with lessors

Under the presidency of Evariste Ndayishimiye, in power since 2020, Burundi is working to reconnect with international donors who left in 2015, when ex-president Pierre Nkurunziza's decision to run for a third term - in defiance of the Constitution - triggered strong popular protest that was violently repressed. Sanctions and the suspension of international support led to severe economic difficulties, including major shortages. Since 2022, signs of improvement - albeit relative - in the country's human rights record have led to a gradual resumption of international cooperation, mainly from Western and multilateral donors, such as the US, the World Bank, the IMF and the EU, which have recommitted more than a billion dollars over the 2022-2027 period. The stranglehold of the presidential party, the Conseil National Pour la Défense de la Démocratie - Forces pour la Défense de la Démocratie (CNDD-FDD), on Burundi's political life continues unabated, preventing the emergence of any form of opposition capable of winning, while the outcome of the 2025 legislative elections is in absolutely no doubt.

Landlocked in the Great Lakes region, Burundi's access to world trade is largely dependent on its coastal neighbour, Tanzania. The construction of a new railroad line (scheduled for completion in 2028) linking the country to the port of Dar es Salaam, through which 80% of its trade passes, will facilitate the supply of foodstuffs as well as mineral exports. Nickel mining is set to be a big earner for Burundi, whose government signed a 10-year, $15 billion giga-contract with the Russian company East African Region Project Group in 2022. Furthermore, in a fragile and unstable security context, Burundi's reinforced military coordination with the Democratic Republic of Congo (DRC) should continue in 2025 to combat attacks by Congolese rebel militias on the border between the two countries. On the other hand, the attempt to re-establish relations with Rwanda, initiated in 2023, quickly ran out of steam after President Ndayishimiye decided to block the border with his neighbour in January 2024, accusing it of harboring and training a rebel group hostile to the government in Gitega, the new capital.

Last updated :July 2024