Burundi: More Fiscal Resilience Will Improve Government Effectiveness
December 19, 2013
BUJUMBURA, December 19, 2013 — Burundi will need to mobilize more domestic revenues and improve its budget transparency in order to reduce poverty more significantly, boost jobs and opportunity, and cushion itself against economic reversals, according to ‘ Strengthening Fiscal Resilience to Promote Government Effectiveness,’ the World Bank’s latest Burundi Public Expenditure Review (PER), which was written in close collaboration with Burundi’s Ministry of Finance and Economic Development Planning.
The study notes that Burundi has maintained a stable macroeconomic environment and over recent years improved its performance in health, education and gender. In spite of this recent progress, the report says that economic growth remains weak, with GDP rates below expectations.
Compared to neighboring countries in the East-African Community (EAC) and other post-conflict countries, Burundi’s economic growth is modest. With a population growth averaging 3% a year and economic growth forecasted at 5% in the medium term, the country will be greatly challenged to reduce its high poverty rate and improve living standards life conditions for its population without adopting key reforms.
Burundi, a small, landlocked country in the Great Lakes region of Africa, is one of the most aid-dependent countries in the world. The country is vulnerable to external shocks such as volatile food and energy prices, declining aid flows, and the adverse impact of climate change. These factors are made worse by the prevalence of current expenditures in government budget, a high level of tax exemptions – counting for as much as three percent of GDP - and limited options to protect it against economic reversals.
The report mobilizes new data to illustrate the need for the government to adopt sound fiscal policies, and to show how falling aid inflows combined with rigid public spending leaves Burundi with little fiscal room to maneuver. A particular concern is that Burundi’s coffee and tea make up almost 70 percent of its total export earnings and that this lack of diverse exports makes it difficult to widen the revenue base and finance public investments.
In addition, the report suggests that continuous efforts are needed to stabilize current public spending and to comprehensively reform the civil service. Policy measures such as broadening the tax base, increasing the predictability of aid transfers, and improving the quality of budget data could help to overcome the country’s most pressing challenges.
“Future fiscal sustainability will largely depend on the government’s sustained efforts to strengthen revenue mobilization and reform tax administration, while improving transparency in budget planning and execution,” said Rachidi Radji, Country Manager for Burundi.
In the medium terms, priority actions include improving agricultural productivity and maximizing the growth potential of future mining revenues.
“For the Government, implementing the recommendations outlined in this report will be necessary to improve the structural weaknesses in the management of the public expenditure,” said his Excellency Tabu Abdallah Manirakiza, Burundi’s Minister of Finance and Economic Development Planning.
The report, which benefitted from close dialogue between the World Bank, the Government of Burundi, and its development partners, suggest a policy framework that “can help Burundi move its future development course away from the danger of a fragility trap and into a new era of sustained growth and reduced poverty,” said Marco Larizza, World Bank Task Team Leader and lead author of the report.
A joint Government-Donor “Technical Working Group” has been formally established to act as a forum for discussion and analysis of the report’s preliminary findings. Valuable comments and inputs have also been received from Civil Society Organizations, with the ultimate goal of promoting more public debate around embracing evidence-based policies.