After three years of contraction, Burundi’s economy continues to recover slowly with annual GDP growth improving from to 0.5% in 2017 to 2.8% in 2018, based on estimates from the World Bank.
Agriculture accounts for over 40% of GDP and employs more than 90% of the population. Burundi‘s primary exports are coffee and tea, which account for 90% of foreign exchange earnings. However, the international prices of agricultural commodities declined by 3%. This is likely to have a negative impact on the revenues generated from coffee. Burundi ‘s export earnings and its ability to pay for imports, rest primarily on weather conditions and international coffee and tea prices.
Headline inflation averaged 16.1% in 2017 but began declining in 2018, with the 2018 average being -2.58%( being in deflation) as per the national statistics. October 2018 saw the country record an all-time low inflation of -8.4%, largely due to a good agricultural harvest and the subsequent decline of food prices.
Foreign exchange pressures have continued, with shortages constraining the import of essential goods. The decline in external support after 2015 has resulted in the depletion of international reserves with limited other sources of foreign exchange (exports, foreign direct investment, and remittances). The Central Bank made interventions, including liquidity injections and restrictions on foreign exchange transactions, which resulted in the limited depreciation of the official exchange rate to 2.3% in 2018 from 4.6% 2017.
An important change in the financial calendar of Burundi occurred in 2018, where the budget has been running from January to December, but for 2019, the Government decided to harmonise its budgeting year with the rest of EAC. This means that the country will operate on a preliminary budget from January to June 2019.
The low interest rate regime continued in 2018. In genaral, there has been a declining trend from Decemeber 2017. The 5-year Bond is the lowest in the EAC region at a rate of 10.5% while the 364-day T-bill rate annual average was 3.82% in 2018.
2019’s outlook for Burundi is promising, especially after the successful and peaceful referendum that was held in May 2018. The incumbent president further renounced his participation in the 2020 general elections, which has spurred on the country, giving hope for a brighter future. Furthermore, there are several strengths and opportunities, that if tapped, will have a considerable impact on growth and job creation. These include underexploited mining potential for peat, limestone, nickel, tantalite, phosphates, vanadium and carbonatites. Moreover, there is massive room for exploitation of Burundi’s hydropower potential of 1,300 MW, with currently less than 40 MW tapped.
This will supplement development of the 650-kilometer-long Lake Tanganyika, home to 10 ports, which could make it an interregional trade hub. The establishment of the Burundi Special Economic Zone (BSEZ) in Warubondo next to the DRC border is also expected to boost the Economy growth of Burundi.