Economic Overview

Although recovery has been slow compared to other post-conflict countries, Burundi has made significant progress on economic and social developments. Economic growth increased from 3 percent in 2005-07 to 4 percent in 2008-10, despite daunting challenges including the food and fuel crisis and the international financial meltdown. With a GNI per capita of US$160 in 2010, Burundi remains one of the poorest countries in the world with one of the highest population densities in the world. Nevertheless, Burundi has almost reached its pre-war level of per capita GNI (Atlas method), which fell by almost 40 percent during the conflict (US$170 in 1993 to US$100 in 2005). Burundi’s annual population growth rate, which is at an estimated 2.4-2.8 percent (2010) is among the highest in Sub-Saharan Africa.  It will be difficult to increase living standards without both a slow-down in population growth and a significant acceleration of the annual GDP growth rate.  In social sectors, the primary education gross enrollment rate has significantly improved from 80 percent in 2003-04 to 124 percent in 2008. Health outcomes have also significantly improved in recent years.  

The economy depends on the highly volatile agricultural sector, which accounts for about half of GDP and approximately 90 percent of employment. Coffee is the main export, accounting for more than 60 percent of export revenues. The share of the secondary and tertiary sectors has been increasing. The secondary sector—which includes manufacturing, processing, construction, and related industries—represents the smallest overall share of the economy (17 percent) with manufacturing and construction as its main subcomponents. The tertiary sector—services, transport, and commerce—represents a relatively large and growing share of economic output, contributing about 37 percent of GDP.

Since 2000, the Government of Burundi has implemented a program of financial and structural reforms to stabilize the economy and revive economic activity. These have included: prudent monetary policy implemented by a more independent central bank in the context of a liberalized foreign exchange regime, prudent fiscal policy with poverty-focused expenditure priorities, and steps to strengthen and improve the transparency of public financial management.

Successful implementation of the government’s economic reform program enabled Burundi to reach the Heavily Indebted Poor Country (HIPC) decision point in August 2005 and HIPC completion point in January 2009. Debt relief to Burundi under the enhanced HIPC Initiative will total about US$832 million in net present value (NPV) terms, with the International Development Association (IDA) contributing to more than half of it (US$425 million).

Political Context

In the ten years since the Arusha Agreement, Burundi has experienced both great strides and major setbacks on the road to lasting peace. After 13 years of civil war, Burundi's 39 politico-ethnic groups signed a comprehensive peace and reconciliation agreement in Arusha (Tanzania) in August 2000. This paved the way for the formation of a transitional government in 2002, a new constitution in February 2005, and presidential and parliamentary elections in August 2005. In 2006, a cease-fire accord was reached with the last hold-out rebel movement, the FNL-PALIPEHUTU faction, but sporadic fighting continued and it took two further years of negotiations to reach a cessation of hostilities. Over 2008 and 2009, FNL-PALIPEHUTU renewed its commitment to negotiated peace, and reintegrated into the political system. In April 2009 FNL (Front National pour la Liberation) became Burundi's 42nd political party after removing the ethnically charged part of its name PALIPEHUTU, thereby making the group constitutionally eligible to register as a political party. Disarmament, demobilization, and reintegration efforts have continued as well.

Burundi's second democratic elections in 2010 constituted a milestone in the country's political transition.  The second democratic elections under the new constitution took place from May 24th to September 8th.  According to international observers, the elections conformed to international standards despite minor observed irregularities during the local council elections.  However, thirteen opposition parties, alleging fraud and vote-rigging, formed a coalition to boycott the presidential election, leaving President Nkurunziza to stand unopposed.  President Nkurunziza was therefore, in June, re-elected for a second term, claiming 92 percent of the votes cast. Three political parties, notably the Union pour le progress national (Uprona) and the Front pour la democracie au Burundi (Frodebu-Nyakuri branch) decided to contest the legislative elections, which took place in July 2010 and are now represented in Parliament.

The security situation remains calm but uncertain. Controversies over the election results sparked violence that sometimes led to loss of life.  Although most of the country is at peace with sufficient security for economic and social activities, the self exile of the FNL president and former rebel leader Rwasa Agathon along with other opposition leaders in the consortium of opposition parties, also known as the Democratic Alliance for Change (ADC), has created an atmosphere of uncertainty.  Although Rwasa has denied any intention to return to armed struggle, sporadic attacks on the population have continued. While there is cautious optimism after the elections, it remains necessary for national, regional and global partners to help consolidate peace and secure the development gains built over the past ten years.

In this divisive environment, the ruling party has made some efforts to reach out to other parties. While the ruling party gained the majority in the parliamentary elections, the two opposition parties who did not boycott the polls gained representation. The authorities further appointed members from these two parties in the government.  While this step can only be seen as preliminary, it indicates that the government is willing to include other groups in the decision making process. Opposition parties that boycotted elections allege an absence of inclusive political dialogue in public affairs and persecution of opposition political leaders.

Development Challenges

For many years conflict displaced a large portion of the rural population and destroyed important economic and social infrastructure. As a result, poverty is particularly widespread in rural areas. About 80 percent of the population suffers from food insecurity. Surveys estimate that national poverty incidence stood at about 67 percent in 2006, a notable drop from 81 percent in 1998, yet far from the 2015 MDG target of 18 percent.  Rural poverty is estimated to be twice that of urban areas. Regional differences are particularly acute, with poverty rates fluctuating between a low of 28.7 percent in Bujumbura to a high of 82.3 percent in the province of Kirundo. The intensity of poverty also varies among groups. Households living in urban areas whose head or spouse has a better education and who benefit from better employment are less likely to be poor. 

 Recent estimates based on wealth index comparison indicate that poverty might have worsened from 2005 to 2009.   Burundi faces tremendous challenges in diversifying the economy and income sources, reducing the vulnerability of the agricultural sector to shocks, and improving governance.

It is unlikely that Burundi will reach the Millennium Development Goals (MDGs) by 2015, despite signs of progress.  Life expectancy rose from 43 years in 2000 to 51 years in 2010.  Vaccination rates have improved to 103 percent in 2009.  The government has attempted to increase coverage of health services by announcing in May 2006 free health services to children under five and pregnant women.  This measure helped decrease under-five mortality rate by 20 percent from 2005 to 2009.  However, the lack of essential medicine and qualified staff is affecting service delivery.  To improve quality and coverage while ensuring the sustainability of the gratuity reform, the government has extended the successfully piloted results based financing (RBF) program to the whole health sector.  In education, progress has been made, but further progress is critical to the future growth of the country.  Since the “free school” policy was introduced in September 2005, primary education gross enrollment has significantly improved from 80 percent in 2003-2004 to about 100 percent in 2005-2006, and more that 130 percent in 2009.  However, quality is low and completion rate is around 46 percent. As a result, the odds of reaching the MDG of 100 percent primary completion rate remain slim. 

 

The Government of Burundi approved its first Poverty Reduction Strategy Paper (PRSP) in September 2006, following an extensive participatory process unprecedented in the country’s history. PRSP consultations took place in all 17 provinces and involved more than 145 civil society organizations and 14 sector and thematic groups.  The current PRSP has four strategic priorities: (i) improve governance and security, (ii) promote sustainable and equitable economic growth, (iii) develop human capital, and (iv) prevent and control the spread of HIV/AIDS.  The first Annual Progress Report (APR) on the PRSP, which was prepared on the basis of the same broad participatory process as the 2006 PRSP, was received by the Bank and the International Monetary Fund (IMF) in November 2008.  The government is currently preparing a new PRSP, based on the 2025 Vision of the government to accelerate growth and poverty reduction in Burundi.

In June 2008, the World Bank’s Board of Executive Directors discussed the current Country Assistance Strategy (CAS) for Burundi.  The World Bank then provided an estimated US$335 million in IDA resources to support the development program of Burundi over the following four years (mid-2008 to mid-2012).  Based on Burundi’s PRSP, the Bank’s strategic directions will continue to support Burundi’s transition from a post-conflict economy to a developing economy by selectively assisting the government to implement a credible PRSP.  This will help the country: (i) promote sustainable and broad-based economic growth through increased productivity of food crops, larger exports base, improved business environment, and improved infrastructural services thanks to regional integration; (ii) improve access to social services to consolidate social stability through more efficient and transparent public financial management and improved access to quality basic services; (iii) diffuse good governance and anti-corruption practices by strengthening Burundi’s governance strategy and institutions to improve public financial management.

 

The World Bank is currently providing financing for 11 projects, with commitments of US$371.8 million, to provide budget support, assist economic reforms, and support improvements in agriculture, community development, education, electricity, healthcare, HIV/AIDS, transport, and water supply. Output and outcomes of Bank supported programs include:

More Efficient and Transparent Public Financial Management and Improved Business Environment

• Strengthening the legislative and regulatory framework, including adoption of a new organic law for the Ministry of Finance, a revised procurement law, investment code, commercial code, and competition law.
• Establishment of Regulatory National Authority and National Directorate of Procurement Control.
• Development of a central medium term expenditure framework to improve budget planning and credibility.

Improved Access to and Quality of Social Services

• Improving access to education: from 2005 to 2010 the primary completion rate increased to 47.7 percent from 38 percent and gross enrollment rate to 134 percent from 80 percent.
• Filling the gaps in education infrastructure and materials by constructing 32 new schools and continuing the distribution of tens of thousands of textbooks to schoolchildren.
• Improving the access to health facilities: in some areas, the distances to health centers was reduced from 12 kilometers to 7 kilometers with the construction of six health centers.
• Curbing the risk of HIV/AIDS infection: (i) increase in the number of voluntarily tested people from 89,000 to 237,000 from 2005 to 2009, (ii) increasing the number of patients placed under antiretroviral treatment to 17,604 in 2009 from 6,416 in 2005, (iii) raising the number of HIV positive pregnant women under mother-to-child transmission protection to 14 percent from 4 percent.
• Increasing access to water by 2 percent with the construction of a 335 kilometer water supply network providing water to 120,000 people.

Improved Reintegration of Ex-combatants and Vulnerable Groups

• Contribution to peace and security by demobilizing 29,527 adult ex-combatants from 2004 to 2008 and in 2009 additional 6,886 ex-combatants demobilized, including 380 minors.
• Strengthening local development since 2007: training of 1,880 local staff in project management techniques; implementation of 182 micro-projects with 32 involving vulnerable groups.
• Accelerating job creation from 2004 to 2009 (6,082,722 person-days, 17 percent women); increasing budget allocations to community infrastructure by 80 percent from 2004 to 2007; creating of 3,614 maintenance teams for local community infrastructure.

Improved Infrastructure

• Investing in roads from 2004 to 2010: Rehabilitation of more than 40 kilometers of roads and maintenance of over 122 kilometers of roads; generating over 10,000 jobs in the rural areas; and developing road maintenance schemes by strengthening the financial capacity of the Road Fund.
• Enhancing access to electricity while securing financing viability by financing 15,000 additional prepayment meters in public buildings and areas with poor revenue recovery.
• Building national capacities in procurement, and restructuring the national power company’s balance sheet to remove unsustainable debt.

Increased Productivity of Food Crops and High-Value Export Crops

• Rehabilitating agriculture from 2004 to 2010 by improving yields: rice yields rose to 4.5 metric tons per hectare (MT/ha) from 2.5 MT/ha; cassava to 10 MT/ha from 6 MT/ha; milk to 6 liters per cow per day from 2 liters per cow per day. About 40,000 direct households benefitted (35 percent headed by women) and another 240,000 people benefitted indirectly (45 percent were households headed by women).
• Providing support to over 70,000 households working as producer organizations.

In Burundi, the government and development partners are taking steps to improve donor harmonization.  Most of the policy reforms, operations, technical assistance, and AAA financed by the Bank’s program are worked out in close collaboration with and support of all major multilateral and bilateral donors operating in Burundi, including the African Development Bank, the European Commission, United States Agency for International Development (USAID), Belgium, France, and Canada.  First, The World Bank and the African Development Bank carried out joint stakeholder consultations in Burundi to prepare their respective country strategies. The Bank, the International Fund for Agricultural Development, the Food and Agriculture Administration of the United States (FAO), and USAID collaborate to ensure full complementarities of respective work programs in agriculture.  Under the CAS, the Bank seeks to improve aid effectiveness and coordination by building the capacity of Burundi’s aid coordination unit.  In addition, the Bank and DFID are helping the government use, when feasible, sector-wide approaches and monitor progress toward the partnership commitments of the Paris Declaration. The World Bank works closely with the International Monetary Fund and the European Commission to improve public finance management.  In partnership with the Dutch and Norwegian governments, the Bank has provided budget support.

IDA also collaborates closely with UN agencies such as the United Nations Children's Fund (UNICEF), the United Nations High Commissioner for Refugees (UNHCR), United Nations Development Programme (UNDP), and World Health Organization (WHO) to improve the provision of water, sanitation, health, and education to the poor.  In partnership with UNDP and the Africa Capacity Building Foundation (ACBF), IDA is strengthening the capacity of Burundians to plan development programs, monitor progress, evaluate results, and manage their own development processes. Wide consultations are also undertaken regularly in order to improve the quality of policymaking, strengthen national ownership of key reforms, and promote accountability.

In 2009, the World Bank, African Development Bank and the government completed the first Country Economic Memorandum of Burundi since 1994.  Burundi held its first Consultative Group (CG) meeting on October 26-27, 2009, which provided an opportunity to discuss the conditions and resources needed in Burundi for economic development, poverty reduction, and sustained peace.  During the meeting, the Government of Burundi and its international partners made commitments to ensure continued progress in Burundi toward peace and development.