Recent Developments & Prospects
Economic Cooperation, Regional Integration & Trade
Economic & Political Governance
Public Sector Management, Institutions & Reform
Natural Resource Management & Environment
Thematic analysis: Structural transformation and natural resources
Authors: Sibaye Joel Tokindang, Daniel Gbetnkom
- Burundi’s growth accelerated to an estimated 4.6% in 2013, up from 4.2% in 2012, thanks to increased activity in the secondary and tertiary sectors.
- Government finances improved, but the country is still faced with major constraints due to the poor mobilisation of domestic resources and the volatility of external aid; meanwhile, political tensions have grown in the run-up to 2015 elections.
- Progress in implementing the policy of free primary-school tuition and free healthcare, education for children under five and pregnant women moved Burundi seven places up the Human Development Index (HDI) in 2013.
A series of exogenous shocks (a rise in world oil prices and food prices and a decline in revenue) struck economic activity in 2013. Growth in GDP accelerated slightly from 4.2% in 2012 to 4.6%, inflation dropped from 18.2% to 7.8%, the fiscal deficit narrowed from 9.1% to 2% and the Burundian franc (BIF) depreciated by 5% against the US dollar (USD) from January to December.
The primary sector contracted by 2% in 2013, mainly due to the effects of rainfall on coffee production. The economy has slowly recovered over the past two years as services and the secondary sector have expanded, the latter having benefited from investment in industry, construction and public works.
The government has continued to implement the Extended Credit Facility (ECF) concluded with the International Monetary Fund (IMF) in January 2012. The programme was hit by the poor mobilisation of government revenue after legislation passed in 2013 significantly reduced the tax base on personal income tax. As a result, the government was forced to approve a supplementary budget in July 2013, with new measures to strengthen the mobilisation of tax revenue and reduce current expenditure.
Despite the tough economic climate, Burundi’s economic policy aims to provide the country with the necessary infrastructure and promote rapid, sustained growth in line with the strategic framework for growth and poverty reduction (Cadre stratégique de croissance et de lutte contre la pauvreté, CSLP II) adopted in February 2012. Major energy, transport, water, electricity and telecommunications projects began in 2013, and new programmes were presented to technical and financial partners at industry conferences in July and October 2013.
Given the uncertainty surrounding foreign aid over the next few years, the government intends to focus on mobilising domestic revenue by pursuing its taxation reforms. The measures it plans include simplifying procedures, introducing a flexible tax system, broadening the tax base, decentralising and modernising collection structures, and harmonising the tax system with the regulations of the East African Community (EAC).
Table 1: Macroeconomic indicators
|Real GDP growth||4.2||4.6||5.2||6.7|
|Real GDP per capita growth||1||1.5||2.1||3.6|
|Budget balance % GDP||-9.1||-2||-3.6||-3.9|
|Current account balance % GDP||-15.3||-14.6||-15||-15.3|
Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.