Burundi Economic Policy and Development Potential

Burundi Gitega coffee factory

Burundi’s accession to the East African Community (EAC) in 2007 was an important step towards the economic development of the small East African state. In the EAC, Burundi (along with South Sudan) is the economically weakest link and also lags far behind the other member states in terms of infrastructure and level of development. The situation has continued to deteriorate since 2015. A common market of the five member states has existed since 2010. This is intended to facilitate the exchange of goods, and freedom of establishment for workers is planned. Following the example of the EU, there should even be a common currency. The date of introduction 2012 could not be met here: Kenya, for example, feared financial disadvantages as the strongest economic force in East Africa, Burundi could not withstand the strong economic competition due to the political situation. The common currency plans were put on hold. More recent considerations are considering an introduction in 2024. The positive short- and medium-term effects of the Customs Union of the East African Community (EAC) are still barely noticeable. A real integration of the country into the economic union is only inadequate instead of. It becomes clear that Burundi must significantly increase its reform efforts in order not to be left behind in competition with the other member states or to be able to benefit from integration. However, the EAC offers the possibility of improved regional integration and opportunities for more efficient economic development in Burundi, for example in the coffee sector. In 2008, Burundi made modest efforts to reform and privatize the coffee sector, but there has been little export growth to date. So far, Burundi has not been able to claim its interests vehemently enough within the EAC, which may not least be due to the English language used in negotiations. Since 2016, the Burundian Libérat Mfumukeo Secretary General of the EAC for 5 years.

According to ezinereligion, Burundi is a member of the African Union and NEPAD. NEPAD (= Initiative New Partnership for Africa’s Development) was launched in 2001 by the heads of state and government of the “Organization for African Unity”. In this way, the African states commit themselves to democracy, respect for human rights, good governance and stable economic policy. In 2009 Burundi signed the CAADP (= Comprehensive Africa Agriculture Development Program) program, in French PDDAA (= Program détaillé de développement de l´agriculture en Afrique), in which the states of East Africa, through the initiative of NEPAD, join forces in the agricultural sector Agree to improve productivity. The CAADP is controlled by COMESA.

At the beginning of 2017, Burundi applied for membership of the SADC (Southern African Development Community). Reasons are probably economic as well as political structure. Most recently, Burundi had behaved very cautiously towards the EAC, because the EAC was also critical of the political situation in Burundi. But due to the faltering peace talks in February 2017, Burundi will probably have to wait longer to join the SADC. It remains to be seen when negotiations will resume.

The aim of the Burundian government since 2008 has been to modernize its economy and administration by focusing on strengthening state institutions and improving the infrastructure. Tourism should also be promoted sustainably. In 2010 the National Public Finance Management Strategy was launched to help Burundi reduce inflation and increase tax revenues. Burundi’s development policy goal was Vision 2025 adopted, the main areas of which are to improve the justice system, transform the economy, strengthen civil society and reconcile land management with nature conservation. For Bujumbura, Vision 2045 was also adopted, which deals with the transformation of Bujumbura into a regionally important center of action. In addition, Burundi has been promoting investments from all over the world for many years, improved conditions in its own country for exports and tried to strengthen the doing business of smaller entrepreneurs. Many see Burundi on a good path to a better one economic future, but the development will be steered to a large extent by the continuity of domestic political stability and regional integration into the EAC as well as the development of democracy. Burundi has been heavily indebted in the past. The debt problem slowed economic development and interest in investments in the small East African state. In 2009, Burundi received approximately US $ 800 million in debt relief under the HIPC initiative. Despite the country’s relatively poor creditworthiness and the risk of over-indebtedness, Burundi received new loans from the IMF at the end of 2011 to build a dam to cover its energy shortage and improve its infrastructure.

Overall, it will be important to dismantle structural problems that hinder the development of a functioning market economy: this includes reducing the prevailing subsistence economy in favor of other employment opportunities, raising the low income level of the dispersed population, preventing the fragmentation of land, and providing incentives for investors to create to diversify the economy as a whole to recognize and combat ecological problems and to reduce dependence on raw materials on the world market. All of this turns out to be a huge task for the country and makes Burundi’s economic transformation more difficult to the extent that political stability and the rule of law are making little progress. Since the value of the Burundian franc depends mainly on external financial flows and their fluctuations, the economy as a whole can only react to financial problems with difficulty, so that inflation in turn makes it difficult for the economy to recover.

The political unrest in 2015 severely damaged Burundi’s economy. Foreign investment and development aid payments have been reduced or suspended. The decision by the European Union to suspend government financial support in March 2016 meant a serious setback for the Burundian economy. Tax revenues from the OBR (Office Burundais des Recettes) fell dramatically, and the foreign trade deficit hardly improved. In addition, there was an increasing inflation. Burundi tried to close the budget deficit through greater economic cooperation with China balance. The agreed increase in the extraction of rare earths failed, however, due to a lack of or inadequate infrastructure, high energy costs and political uncertainty. For the new president from 2020, the tasks will remain enormous.

Burundi Gitega coffee factory