Burundi

The Burundian economy witnessed a contraction in growth in 2009. The rate of real gross domestic product (GDP) growth fell from 4.3% in 2008 to 3.3% in 2009. The main causes were: (i) the ongoing effects of the international financial crisis; (ii) the drop in coffee and food crop production; and, (iii) reduced industrial production, mainly in the sugar sector. Although production in the tertiary sector expanded by almost 12%, this was not sufficient to stem the downward trend in GDP growth. In Burundi, as in many developing economies, the primary sector plays a central role in economic growth.

The demand components all had a positive influence on growth in 2009. The private sector’s contribution to gross capital formation increased considerably more than that of the public sector, owing to the increased share of private enterprise in investment and national production. Public investment continued to make the largest contribution to growth, however. Final consumption added 2 percentage points to growth. The growth in public consumption is mainly due to the increase in the civil service wage bill. Foreign trade made a positive contribution to growth of 0.4 percentage points, owing mainly to a proportionally greater rise in exports than imports.

The budget deficit deteriorated in 2009. The overall balance as a share of GDP went from -3.1% in 2008 to -4% in 2009. This rising deficit is due to the government’s 2008 commitment to increase the salaries of various sections of the civil service. While overall revenue increased in volume, it decreased as a proportion of GDP from 30.3% in 2008 to 26.8% in 2009.

In terms of monetary policy, with a view to containing inflationary pressures, the authorities committed to maintaining relatively moderate monetary growth and refinancing rates as well as a stable nominal exchange rate. Although the foreign exchange market determines the exchange rate, the central bank retains a certain level of control in terms of fixing the amount of foreign exchange made available to financial institutions.

The external position is improving. Interest payments on public debt were under control in 2009. Burundi has reached the completion point of the Heavily Indebted Poor Countries (HIPC) Initiative, thereby achieving cancellation of an important part of its multilateral debt. The government’s policy is to reduce public debt as much as possible by relying more on non-interest bearing grants or highly concessional loans.

Private sector development is hindered by an unfavourable business environment. The Doing Business and Global Competitiveness reports classify Burundi as one of the countries where it is most difficult to start up a business and where investment, production and commerce are most hindered by the political and institutional environment.

Other recent developments have been noted in the financial sector, in public sector reform, in infrastructure, in the management of natural resources and in reform of the agricultural sector. The financial sector was characterised in 2009 by the liberalisation of the refinancing system of second-tier financial institutions.

Public sector reforms introduced in 2009 were essentially institutional in nature, for example the adoption of a strategy and action plan to improve the management of public finances, the proclamation of a public procurement code, the census of civil servants and those working in the police service and the armed forces, the closure of off-budget accounts, and many others.

As far as infrastructure is concerned, the upgrade of the capital city Bujumbura’s motorway network continued and the road linking the provinces of Gitega and Karuzi was finished. Studies were carried out on future routes, mainly the Gitega-Ngozi axis and the nationally important Ruhwa-Cibitoke-Rumonge-Makamba highway.

The main environmental management initiatives carried out in 2009 concerned environmental education and reforestation. A land tenure policy paper was adopted in 2009 that aims to resolve land ownership conflicts and modernise agricultural production.

Mobilising domestic resources is at the heart of all economic and even structural policies in Burundi in that the country has to rely on its own resources in order to finance development. In 2009, this was focused on applying common external tariffs, replacing transactions taxes with value added tax (VAT), creating a one-stop shop for large enterprises to facilitate payments and the establishment of the Burundi Revenue Authority, which should start operating properly in 2010.

The political situation in 2009 was characterised by increased concerns and demonstrations relating to the elections in 2010. The general political instability index increased from 2.0 in 2008 to 3.7 in 2009.

 

Finally, the situation in terms of social context and human resource development was one of continued poverty in various forms such as low income per capita, a low primary schooling rate and an infant mortality rate that remains very high.

Human development policies were continued in 2009 with measures relating to universal primary education, free health care for children aged less than five years and free maternity delivery services.

The most recent economic developments relate mainly to the implementation of major projects during 2009, while the outlook is limited to projections for 2010 and 2011 and established on the basis of a certain number of estimates and hypotheses.

In general terms, certain macroeconomic indicators such as the growth rate and the current account balance have deteriorated, but others have improved; in particular, the rate of inflation has been brought down to its 2007 level and the current account balance as a percentage of GDP has decreased. Burundi’s economy witnessed a slowdown in growth in 2009. The real GDP growth rate was 3.3% in 2009 compared with 4.3% in 2008. This trend is due to several factors, including: (i) the ongoing effects of the international financial crisis; (ii) the drop in production in the primary sector; and (iii) decreased output in the secondary sector.

Although Burundi’s financial system is not integrated into international financial markets, the financial crisis of 2007-08 continues to affect the country’s economy via the price of petroleum products, the drop in revenue from tourism and the reduction in financial assistance and grants. Soaring prices of non-petroleum products such as chemical fertilisers has also had an impact on agricultural production.

The primary sector remains dominated by the production of coffee. Coffee production, which is technically cyclical, declined in 2009 after a good harvest in 2008. Parchment coffee, for example, experienced a drop in production from 32 000 tonnes in 2008 to 9 000 tonnes in 2009. The coffee sector overall contracted by more than 50%. Food crop production also fell. According to estimates by the technical advisory staff of the Ministry of Agriculture, cereals fell by 2.2%, the production of legumes dropped by 3.4% and the production of roots/tubers fell by 4.3%. The major reasons for these falls are insufficient and irregular rainfalls, the increase in the price of chemical fertilisers, making them difficult for farmers to obtain, the varieties cultivated and the lack of phytosanitary products. Production in the primary sector fell by 8.4% overall in 2009.

The industrial production index (base year 1989=100) fell from 98 in 2008 to 94 in 2009. The drop in sugar production was the main reason for this, the other segments of the sector having remained stable. The above-mentioned factors led, either directly or indirectly, to a fall in the growth of domestic production, which the 12.4% increase in output in the tertiary sector was unable to offset. The decline in performance in certain areas of the tertiary sector (such as mechanical and electrical automotive services and some IT services) was more than compensated for by the increase in output in other areas, such as the mobile phone sector and air transport.

 

This slowdown in growth is cyclical however. If the international economy improves as expected, and if there is a revival in the production of coffee and sugar, the real GDP growth rate should increase in 2010 and 2011, to 3.6% and 4% respectively. The structure of production is in keeping with that of developing countries where the primary sector dominates. The primary sector’s share of GDP was 46.7% in 2008 followed by the tertiary sector with 36.6% and finally the secondary sector with 16.7%.

Food crop production dominates the primary sector. Export crops represent just 3.2% of GDP but they play a crucial role in the Burundian economy as the main source of monetary income for rural households and the country’s main source of foreign currency. Fluctuations in this sector have significant repercussions on the overall growth of the economy.

The tertiary sector is dominated by non-market services with a 23.5% share of GDP, followed by market services with 13.1%. The expansion of non-market services is due to a large extent to the rural exodus, itself caused by a lack of arable land and the low incomes associated with agricultural work. These factors are encouraging an increasing number of young people from rural areas to move to the city and take up various informal sector jobs in the capital.

Information and communication technologies constitute the best-performing branch within market services. The mobile phone coverage rate has increased following the expansion of the existing network.

The secondary sector is largely dominated by two food and drink processing industries, namely the Moso sugar company, SOSUMO (Société Sucrière de Moso), and the Burundian brewery and lemonade manufacturer, BRARUDI (Brasserie & Limonaderie du Burundi). The other industrial units in chemicals and textiles represent less than 10% of industrial production.

The components of demand all had a positive impact on growth in 2009 apart from foreign trade. Gross capital formation contributed 0.7 percentage points to the volume growth of GDP. Public investment remains the main contributor, adding 0.6 percentage points to real GDP growth compared with just 0.2 percentage points for the private sector. The largest public investment projects in 2009 were the construction of the tarred road linking Gitega, Karuzi and Muyinga, the upgrade of the motorway network in Bujumbura and the development of some drainage basins. Private sector investment in 2009 related mainly to the expansion of the mobile phone network, which now extends to almost all the country.

Total investment should increase its contribution to growth in 2010 and 2011 to 0.9 percentage points and 1.4 percentage points respectively, while, based on the same projections, the contribution of the private sector will remain at 0.2 percentage points. The predominance of the public sector is due to the increase in foreign development assistance ahead of the 2010 elections, which should help strengthen economic and political stability in the country.

Consumption increased overall by 1.9% in volume, the percentages of variation being almost equal for public and private consumption. The main reason for the increase in public consumption is the rise in the civil service wage bill, which is the result of union demands for the government to adjust salaries in line with the cost of living rather than an increase in the number of civil service jobs.

Private sector salaries increased automatically but not to the measure of the increase in the consumer price index. Private consumption is the main component of demand in terms of contribution to real GDP growth with 1.6 percentage points in 2009 compared with just 0.4 percentage points for public consumption. Consumption should make a greater contribution to growth in 2010 and 2011.

The contribution of foreign trade to growth is positive, i.e. 0.4 percentage points, with 0.5 percentage points for exports and -0.1 percentage points for imports. The outlook suggests a deterioration of the trade balance in 2010, when the contribution to GDP growth is expected to be -1.3 percentage points. The anticipated increase in coffee production in 2010, taking into account its cyclical fluctuations, remains dependent on the presidential, parliamentary and local elections. These elections could distract the attention of households, businesses and the Burundian government. The elections could also disturb agricultural activity and lead to a deterioration in the trade balance. The trade deficit should decrease in 2011 with an estimated balance of -0.3% of real GDP.

In addition, Burundi’s accession to the East African Community (EAC) customs union in July 2009 could lead to a drop in the prices of goods imported from the sub-region as soon as 2011. This would lead to a decrease in the value of imports, while keeping household satisfaction stable.

Co-ordination of fiscal and monetary policies improved during 2009. Economic growth, the public deficit, monetary growth and inflation were all maintained at levels relatively close to the targets of the East African Community (EAC).

Table 3 highlights the sustainability indicators of public finances for both revenue and expenditure. The main conclusion to draw from this table is that the primary budget deficit increased in 2009 and is likely to continue to do so in 2010 and 2011 owing to the budgetary constraints that are typical of developing economies like Burundi.

The budget deficit deteriorated during 2009. The overall balance as a percentage of GDP dropped from -3.1% in 2008 to -4% in 2009. This deficit is mainly the result of an increase in expenditure that was agreed as part of the 2009 Finance Act, raising expenditure by more than 60% from 520 billion Burundi francs (BIF) to BIF 855 billion. This increase was due to the government’s fulfilment of a commitment taken in 2008 to increase salaries in various sections of the public sector (doctors, university teachers and administrative staff, primary and secondary school teachers, police officers and members of the army, etc.).

Current expenditure, inflated by the wage bill, represents more than 80% of total expenditure and 25.5% of GDP. After the wage bill, social expenditure – on universal primary schooling, free health care for all children under five and free birth services – constitutes the second most important expenditure item.

Total expenditure, and the wage bill in particular, will probably increase in 2010 and 2011 in a bid to mitigate the unemployment problem. More precisely, the ratio of total expenditure as a percentage of GDP should reach 32.8% in 2010 and 34.9% in 2011, under the assumption of accelerated growth and increased official development assistance (ODA) after the 2010 elections. Fiscal revenue did not increase in volume as quickly as GDP. Its ratio as a percentage of GDP dropped from 30.3% in 2008 to 26.8% in 2009. This ratio should increase slightly in 2010 and 2011 to 27.6% and 27.1% respectively.

The main trump card for increasing tax revenue over the short term is the introduction of a value added tax (VAT) to replace transaction taxes that were 7%, 8% and 17%, depending on the taxable item. In the long term, applying external tariffs could benefit intra-regional trade and lead indirectly to an increase in the tax base.

Interest payments on the public debt were under control in 2009. Burundi has reached the completion point of the HIPC Initiative, thereby achieving cancellation of a significant part of its multilateral debt. In addition, the government’s policy is to reduce public debt as much as possible by relying more on non-interest bearing grants or highly concessional assistance. As a result, the ratio of interest on the public debt as a percentage of GDP dropped from 2.1% in 2008 to 1.3% in 2009. The forecast is for this ratio to decrease further to 1.2% in 2010 and 0.7% in 2011.

In principle, the aim of monetary policy is above all to ensure price stability in line with the targeted economic growth rate. The Bank of the Republic of Burundi (BRB) is responsible for conducting monetary policy in Burundi.

The monetary authorities are committed to safeguarding relatively moderate monetary growth and refinancing rates, as well as maintaining a degree of stability in the nominal exchange rate, with a view to controlling inflationary pressure.

The average refinancing rate was 12.2% in 2009 compared with 10.1% in 2008. This increase is due to the fact that the refinancing rate has been freely determined via fiduciary liquidity auctions since 2009.

The BRB is launching a call for tenders for fiduciary liquidity by fixing the volume. The liquidity is then sold at the competitive interest rate. From this point of view, the fiduciary liquidity auctions risk complicating and increasing the refinancing costs for second-tier banks, which would result in an increase in the interest rate on loans taken out by businesses.

The lending interest rate indeed rose in 2009, from 16% to 18.58%, while the deposit interest rate remained between 8% and 9%. The increase in the lending interest rate is also partly due to a high level of inflation.

Even if the inflation rate fell considerably in 2009, from 24.5% in 2008 to 8.3% in 2009, it is still very high, at least in relation to the 5% EAC target. The forecast is for continued high inflation rates of 8.3% in 2010 and 7.0% in 2011. The money supply has been controlled relatively well with a growth of 8.4% in 2009 compared with 34.2% in 2008. This growth slowdown can be explained by a movement of the counterparts to money supply in the same direction, notably domestic production, foreign exchange income from exports, foreign grants and assistance, and foreign debt.

But it is not only the growth rate of real domestic production that has dropped as Burundi also restricted recourse to foreign loans in 2009 in favour of finance by grants and concessional assistance. The nominal exchange rate increased in 2009, establishing itself at BIF 1 236.6 per US dollar (USD) compared with BIF 1 185.7 per USD in 2008. The foreign exchange policy conducted by the BRB is based on a managed float of the rates. The exchange rate is therefore determined by the foreign exchange auction markets on the basis of foreign exchange transactions carried out by commercial banks and private exchange offices.

The depreciation of Burundi’s national currency has been caused by an insufficient supply of foreign exchange on the market. The predictions of a relatively stable nominal exchange rate, around BIF 1 266.9 per USD in 2010 and 2011, are based on proportional fluctuations of the BRB’s supply of foreign currency and the demand of businesses and households for foreign currency over this period.

The trade balance remained in deficit in 2009 but improved in relation to 2008.

The current account balance improved in 2009 to stand at -12.9% of GDP compared with -19.1% of GDP in 2008. As already seen in the analysis of the components of demand, this balance is expected to deteriorate in 2010 following the elections.

The elections risk disrupting agricultural production, in particular of coffee and tea, and hence exports. It is therefore possible that this year’s expected cyclical increase in coffee production will not take place. The economic programme should experience a sustained revival as soon as 2011, with the help of international transfers and foreign development assistance.

Debt stock dropped considerably, from 140.5% of GDP in 2008 to close to 25% in 2009. This is mainly the result of the cancellation of multilateral debt in 2009 when Burundi reached the completion point of the HIPC Initiative.

Outstanding foreign debt will continue on this downward trend in 2010 and 2011 as a result of the country’s commitment to reducing its more expensive multilateral and bilateral debt by increased recourse to grants and highly concessional assistance to finance the public deficit. 

The debt service ratio as a percentage of exports is tending to decrease over time and to settle at about less than 10% of exports. It had already started to decrease in 2007/2008 following the reduction in the burden of foreign debt as the country progressed towards the decision point of the HIPC Initiative.

The business environment is still not conducive to the development of the private sector. Global and specific competitiveness indices (World Economic Forum, 2009) reflecting the business view on basic features show that Burundi has been close to the bottom of the table since 2007.

Burundi came in 177^th among the 181 countries in the 2009 Doing Business report, which shows a deterioration in the business environment compared with 2008, when Burundi ranked 174^th. Certain measures are about to be completed or strengthened, however, in a bid to improve the environment for investment, production and trade.

These measures include the new investment code, the harmonisation of indirect taxation within the East African Community Customs Union (common external tariffs and the introduction of VAT) and the establishment of the Burundi Revenue Authority.

The consolidated assets of financial institutions increased in 2009, from BIF 37 177.5 million to BIF 42 451.7 million, i.e. an increase of almost 14%. In contrast, the reserves of financial institutions decreased in 2009, from BIF 1 410.7 million in 2008 to BIF 1 210.6 million, or a drop of 16%.

This drop in reserves is due on the one hand to increased demand for credit by households and non-financial businesses and, on the other hand, to the toughening of prudential standards for managing fiduciary liquidity by the central bank in order that they are no longer obliged to respond positively to every institutional request without sound justification by the counterparties.

Financial liberalisation, which up to and into 2008 concerned the foreign currency market, was extended in 2009 to refinancing of financial institutions. Since January 2009, liquidity is sold to financial institutions at auction. The refinancing rate is determined by supply and demand on the money market.

This move could be a cause for concern because it means that the large banks can monopolise the purchase of liquidity and then fix the lending interest rates as they wish. The central bank controls the supply volume, however. Moreover, marginal lending facilities remain the central bank’s instrument to refinance institutions that cannot revert to the market for fiduciary liquidity.

As in 2008, public sector reform did not advance in 2009 for many of the same reasons, specifically, weak institutional capacity to conduct reform processes and stakeholder opposition, in particular in the coffee sector.

More precisely, reform relating to the privatisation of public companies is continually being postponed, as certain large public companies charged with strategic public services or sovereign authority mobilise large-scale opposition to reforms.

Some measures to improve transparency in the management of public finances did see the light of day in 2009, however. These related in particular to the adoption of a strategy and an action plan for the management of public finances, to the creation of a national authority for the regulation and management of public procurement, and to the census of the civil service, police and armed forces workforce.

Public infrastructure improved slightly in proportion to needs in 2009, in particular with the construction of primary schools in line with the establishment of primary schooling for all, the construction of water and electricity facilities in the new districts in Bujumbura and the paving of certain secondary roads.

The state envisages constructing 600 four-storey buildings in 2011, all of them in Buyenzi, in a bid to modernise activities in the district but also to resolve the perennial problem of accommodation in the urban areas of the capital, Bujumbura. The programme to modernise Bujumbura’s road network was continued and construction of the Gitega-Karuzi axis was completed. Studies of roads to be built in the future have been carried out, in particular for the Gitega-Ngozi road and the national Ruhwa-Cibitoke-Rumonge-Makamba road.

There were few significant developments in terms of the management of natural resources in 2009. The issue of wastewater and household waste being discharged into Lake Tanganyika has still not been resolved and the development of rainwater drainage is not co-ordinated at Bujumbura. There is no clear land management policy that addresses nature conservation. The reforesting and environmental education programmes were continued, however.

No true reforms were implemented in the agricultural sector in 2009 although studies were carried out on reform proposals within the framework of the land tenure policy paper. The administration of land ownership conflicts continues and will do so endlessly if no policy to register land in rural areas, however costly, is introduced.

Public resources experienced only a slight increase in 2008 (up BIF 34 415.3 billion against a BIF 75 638.9 billion increase in 2007). This weak performance is due to a drop in grants (down BIF 24 163.3 billion in 2008 compared with an increase of BIF 57 052.3 billion in 2007).

It is compensated in part by an increase in tax revenue (+BIF 51 388.3 billion in 2008 compared with an increase of BIF 22 067.9 billion in 2007) and non-tax revenue (+BIF 7 157.1 billion). The share of grants in public resources in fact dropped from 44.5% to 34.5% while the share of tax revenue increased from 51.1% to 59.6% and that of non-tax revenue from 4.4% to 5.8%.  

Grants increased by BIF 605.8 billion in 2009 to reach BIF 743.3 billion. Tax revenue increased from BIF 330 billion in 2008 to almost BIF 420 billion in 2009.

The laws defining the framework of fiscal policy are contained in the general tax code. These laws have been in force since 1964 and have been amended often since then.

In the field of fiscal policy the goal is to increase public revenue progressively to around 19.2% of GDP by 2011 at the latest. Three main reforms have been introduced: (i) the replacement of the transactions tax with the VAT on 1 July 2009; (ii) the adoption of the Common External Tariff (CET) of the East African Community, which replaced the Burundian four-band tariff (30% for finished goods, 15% for intermediate products, 10% for capital goods and 5% for raw materials) by a three-band tariff (0% for raw materials and capital goods, 10% for intermediate products and 25% for finished goods); and, (iii) the computerisation of tax administration.

Two major tax administration initiatives are planned in order to expand the tax base. These include a census of all taxpayers and taxing the wages of the local staff of international agencies. The establishment of the Burundi Revenue Authority is another reform underway. It will help improve public revenue over the medium-term.

The budget deficit deteriorated during 2009. The overall balance as a percentage of GDP dropped from -3.1% in 2008 to -4% in 2009. Tax revenue increased in volume less quickly than GDP and tax revenue as a percentage of GDP dropped from 30.3% in 2008 to 26.8% in 2009. This ratio should increase slightly in 2010 and 2011 to stand at 27.6% and 27.1% respectively.

Total expenditure as a percentage of GDP dropped from 33.4% in 2008 to 30.9% in 2009 and should reach 32.8% in 2010 and 34.9% in 2011, supposing accelerated growth and an increase in official development assistance after the 2010 elections.

Tax revenue in 2008 increased by BIF 51.4 billion to reach BIF 237.1 billion compared with BIF 185.7 billion in 2007. All tax types performed well. Tax on domestic commerce increased by BIF 27.9 billion, i.e. an increase of 30.2%, mainly owing to increased taxes on transactions (+BIF 12.8 billion) and on beer and carbonated drinks (+BIF 11.4 billion).

Income tax revenue increased by BIF 13.7 billion following improvements in tax collection from corporations and individuals.

Tax from foreign trade increased by 37.5% from BIF 24.7 billion to BIF 33.9 billion thanks to high proceeds from import duties (BIF 32 billion compared with BIF 24.5 billion).

In order to mobilise greater tax revenue, Burundi must address a number of constraints associated with: (i) the institutional structure and organisational operation of the tax administration; (ii) the mobilisation of revenue; (iii) the widening of the tax base; and (iv) the fight against tax evasion.

The biggest reform initiated in 2009 to improve the functioning of the tax administration was the creation of two structures, one responsible for large enterprises and the other for small and medium-sized enterprises (SMEs).

The unit responsible for large enterprises takes care of companies with a turnover of more than BFI 300 million while the unit responsible for SMEs looks after businesses with a turnover amounting to no more than BIF 300 million. In this sense, the abolition of a one-stop shop means that the largest taxpayers can be identified and assisted administratively. This structure also makes it possible to schedule tax revenue by category and reduce deviations from that schedule.

Decentralisation in favour of local authorities was interrupted following the security crisis in 1993 that forced business people in the countryside to migrate to urban centres. The tax authorities have since found that their administrative costs exceed the tax base and therefore are higher than anticipated tax revenue. Decentralisation is thus limited to the regional level.

The services of the central office are supplemented on a regional level: there are three regions, namely the South Region for the provinces of Bururi, Makamba and Rutana, the Centre-East Region for the provinces of Gitega, Ruyigi, Cankuzo, Karisi and Muramvya as well as the North Region for the provinces of Ngozi, Muyinga, Kirundo and Kayanza. Staff in the central office handle the provinces of Bubanza, Cibitoke and Bujumbura.

With regards to the staff responsible for collecting taxes, there are deficiencies both in quantitative and qualitative terms, leading to an inability to fulfil the functions of a modern tax administration. In addition, salaries in the tax administration are too low to fend off the temptation of accepting bribes.

Staff members interviewed complained about the discrepancy between prerogatives and financial means allocated to tax collectors. They admit the existence of a great deal of abuse in their facilities, but they put the blame on the government for not allocating the necessary funds for the administration to function properly. Tax administrations do not have their own operating budget.

A partnership with France helps reinforce capacities by issuing grants for in-service training. The British government has pledged logistic support for the Burundi Revenue Authority. Burundi does not have an electronic tax declaration system and the tax compliance rate is growing slowly.

The tax administration authorities blame the informal sector as the sole and primary cause of low revenue. The flight into the informal sector indeed makes the tax base uncontrollable. The presence of the informal economy also gives rise to complaints from taxpayers, who bemoan the lack of equality between economic operators in the informal and formal sectors.

The number of taxpayers has been increasing lately, following an expansion and diversification of economic activity. However, certain exemptions should be adjusted downwards. It is also necessary to remove non-tax barriers that encourage working in the informal sector, namely: (i) the high cost of obtaining travel documents (passports and visas); and (ii) the extended time it takes for the authorities to issue import licences. Mining is not well developed as a sector and remains essentially labour intensive and informal. As it is not subject to any particular taxation, it cannot therefore be cited as a source of tax evasion.

In contrast, the staff in charge of tax collection do not deny that corruption has become a kind of parallel administration in their departments. The government’s failure here is as real as the lack of concern among the members of staff guilty of corruption: severe punishments are non-existent.

The National Liberation Forces (NLF) movement, the country’s last rebel movement, continued its armed combat after the local, parliamentary and presidential elections of 2005, which were held in accordance with the Arusha Accords of 28 August 2000. A series of other accords were negotiated and signed in 2008 between the new democratically elected government and the NLF. These accords were implemented in 2009 and the civil war appears to be ending.

Concerns about the 2010 elections started to cloud the political environment in 2009 however. The general political instability index rose from 2.0 in 2008 to 3.7 in 2009.

The fear among Burundi’s political leaders as well as national and international partners is that these elections will force the country again down paths that would be disastrous politically, socially and economically.

The main lines of disagreement are between the opposition parties and the various civil institutions on the one hand and the ruling party and the government on the other. International institutions such as the International Crisis Group and Human Rights Watch are already outraged about the increase in the number of imprisonments and political assassinations.

In 2009, GDP per capita was USD 143 per year and more than 75% of the population still live below the poverty line. The human development index of 0.413 is the lowest in the East African Community (0.521 for Kenya, 0.505 for Uganda, 0.467 for Tanzania and 0.452 for Rwanda).

Similarly, according to the Human Development Report, life expectancy at birth remains secondlowest in the sub-region (after Rwanda) at 48.5 years compared with 52.1 for Kenya, 49.7 for Uganda, 51.0 for Tanzania and 45.2 for Rwanda.

The employment situation is alarming with unemployment (as defined by the International Labour Office) touching 13.5% of the economically active population in Bujumbura. Women are more affected than men with 17.8% compared with 10.8% for men. The unemployment rate is higher in the 10 to 29-year-old age group (17.2%) than in the other age categories.

Countrywide, the unemployment rate reaches almost 35% of Burundi’s economically active population. Unemployment hits 10.7% of economically active people who have not been to school, 13.7% of those who have been to primary school, 18.9% of those with a general secondary education and 12% of economically active people who went to university.

Alongside the growth objectives, the government is committed to a sustainable human development policy and to the fight against poverty. From this viewpoint, the major actions in terms of boosting human capital are essentially related to education and health.

The government’s efforts can be seen in the increase in expenditure on health and education. The 2008 and 2009 budgets take the Millennium Development Goals on education and health increasingly into account. In the 2008 budget, 22.6% of expenditure was on education compared with 17.1% in 2007. Education’s share of the budget in 2009 was more or less the same as in 2008, although it increased in nominal value. 

As far as health expenditure is concerned, the budget allocated to health represented BFI 23.8 billion, i.e. 5.5% of the national budget, and 0.52% of GDP in 2007. A significant increase in the nominal value of the health budget was passed in 2008. It stood at BIF 29.9 billion, 2.3% of GDP and around 7.7% of the national budget.

The major budgetary issues in this area are free birth services, free health care for all children under five and providing most child vaccines for free.

In terms of job creation, there were no clear measures undertaken to reduce the unemployment rate in 2009. However, the civil service recruited a certain number of young graduates (almost 2 000 new jobs), above all in the education sector. Jobs for non-qualified workers increased in highly labour intensive projects in the construction of buildings and roads.