Burundi is a small, landlocked country with a surface area of 27,830 km2 and 10.8 million inhabitants in 2017. It is one of the poorest countries in the world with a poverty rate of 74.7%. It is also the second most densely populated country in Africa with 470 inhabitants per square kilometer. Burundi’s economy is heavily reliant on the agricultural sector, which, despite the paucity of arable land, employs 80% of the population. Poverty overwhelmingly affects small rural farmers.
Political Context
Burundi is a presidential regime governed by a Consititution revised in 2018 to allow the President of the Republic to run for a third term. Pierre Nkurunziza is leading the country since 2005.
Social Context
Most Burundians, especially those living in rural areas, live in poverty. Food insecurity is almost double the average in Sub-Saharan Africa. Some 1.8 million people are food insecure, with over half the children (six in ten) suffering from stunting in 2017.
Although agriculture employs roughly 80% of the population, the sector contributes only about 40% of GDP. There is very limited access to water and sanitation, and less than 5% of the population has electricity (of which 52.1% are urban households and 2% are rural households).
Poverty reduction in the country is constrained by obstacles such as a weak rural economy, heavy reliance on international development aid, and a poor distribution of wealth. However, the country has made progress with reining in demographic growth as the fertility rate posted a downturn from an average of 6.4 to 5.5 children per woman between 2010 and 2017.
Economic Context
After two years running of recession in 2015 (-3.9%) and 2016 (-0.6%), the economy is slowly recovering. The economic upturn sharpened in 2018, with a growth rate of 1.6% compared with 0.5% in 2017. Nevertheless, this recovery is fragile in view of the many challenges facing Burundi, especially a lack of budgetary resources to finance public investment, persistent foreign exchange shortages with the drop in international reserves, and the vulnerability of the financial sector. Inflation, which soared to 16.1% in 2017, plummeted to 2.6% (deflation) in 2018 as a good harvest drove down food prices. The latest estimates predict growth of 1.8% in 2019, with the political and economic instability preventing the economy from returning to its pre-crisis level.
The country’s external accounts remain vulnerable, with a sharp rise in the current account deficit estimated at 19.2% of GDP in 2018, up from 11.3% in 2017. This deterioration is due to a downturn in exports, an increase in imports, and cuts in international transfers to NGOs.
Foreign exchange pressures have continued, with a sharper drop in foreign exchange reserves and negative repercussions on imports. International reserves covered just 0.9 months of imports in December 2018. The parallel market premium remains high, at 50% at end-December 2018. The banking sector’s soundness has improved with capitalization and liquidity ratios above regulatory standards and profitability indicators on the rise. However, bank portfolio quality remains a concern, with the level of non-performing loans reaching 11.8% in October 2018.
Last Updated: Jun 06, 2019
