Burundi Poverty Note: Prospects for Social Protection in a Crisis Economy

The poverty profile has worsened rapidly since the beginning of the crisis. Rural poverty incidence is estimated to have increased by 80 percent since 1993, with a doubling of urban poverty incidence. Poverty depth is estimated to be among the highest in sub-Saharan Africa. Over 14 percent of the population were displaced from their homes during 1997.

This has resulted in a sharp deterioration in social indicators, which had shown a steady improvement in the years preceding the crisis. Malnutrition, measured by wasting among children under five, is estimated to have increased from 6 percent to 20 percent since 1993. Reported cases of major endemic diseases have increased by over 200 percent, and HIV prevalence is rapidly rising. Primary school enrollment has plummeted since the crisis, from 70 percent to 44 percent. National social indicators show an even worse picture at the regional level: four provinces had primary school enrollment below 30 percent in 1996-7, reaching a nadir of 9 percent in one of the most violence-stricken areas.

The tragedy for the poor is that, at a time of widespread food insecurity, declining monetary incomes and rising health problems, the provision of public services has been drastically reduced. Many schools and health clinics have been destroyed or damaged; health and educational personnel have withdrawn to urban areas to avoid security risks; and agricultural projects funded by donors have closed. It is estimated that over one-third of local water supplies have been destroyed or ceased to function due to lack of maintenance since the crisis.

Causes of the rise in poverty

The crisis exacerbated structural problems in the agricultural sector, where the limits of extensification, declining soil fertility, low use of modern inputs and adverse incentives for investment in the state-controlled cash crop sector had already set in motion a slide in yields. The crisis and the embargo have exacerbated these problems in the form of looting and destruction of household goods and livestock, population displacement, and collapse of distribution channels for agricultural inputs. The embargo has raised the price of non-food goods in rural areas because of the rise in both import and petrol prices: the impact of this, however, is cushioned by high food shares in the budget of poor rural households.

In urban areas, many unskilled workers have been laid off from formal private sector enterprises in response to a drop in industrial GDP of almost 60 percent since 1992. The urban informal sector has also suffered, as enterprises have closed and laid off workers due to difficulties in the supply of materials from abroad and from the interior of the country, and a drop in demand for services from formal sector and expatriate workers. Rapidly rising urban prices following the 1996 embargo — with inflation at 28 percent in 1997 — have further eroded the real incomes of the urban poor.

In addition to population displacement and damage to infrastructure, a sharp drop in the availability of financing for health and education is a major factor in declining access to, and quality of, social services. Government revenue has fallen as a result of the contraction of the tax base, from 20 percent to 12.6 percent of GDP since 1992. The withdrawal of donor developmental aid — from $300 million per annum in 1990–1992 to $39 million in 1997 — has drastically reduced the funds available for reconstruction and social investment.

The need for action on social protection

The poverty trends described above represent a slow slide into crisis. Burundi has averted a full-scale humanitarian emergency since 1993, but the population is inexorably sliding — via declining health and nutrition, and rapidly eroding real incomes — towards a situation where households have no buffer against external shocks. In other words, many households are the right side of the survival line by a whisker; a bad harvest or another round of population displacements can send them over the edge. However, the majority of the population is still able to respond to development initiatives, since they are still in their own homes, in regions where relative security prevails, and still undertaking their normal economic activities. The same is true for institutional and social capital; the public administration and local institutions are damaged but still holding together, although this may not be the case if current pressures continue. Investment in social protection is, therefore, an economic and moral imperative: the cost of rebuilding economic, political and administrative systems will increase exponentially the further the social situation is allowed to deteriorate. Increased efforts by donors and by the government to provide the population with a minimum level of social protection represent an investment in Burundi's human and social capital.

However, there are substantial constraints in Burundi's political, economic and policy environment, which, if not addressed, are likely to limit the effectiveness of social protection initiatives. These include: (i) the security situation, which makes it impossible to undertake normal developmental activities in about 20 percent of the territory; (ii) very limited public resources, due to contraction of government revenues, the dramatic drop in external aid and the increasing burden of public debt repayments; (iii) inadequate social orientation of government budget allocations, with high military expenditure and large subsidies to secondary and tertiary education; (iv) regulatory and incentive barriers, in particular low producer prices for state-controlled cash crops and lack of land tenure security; (v) limited institutional capacity, due to declining compensation — and, as a consequence, professionalism and skill levels — in the civil service, relatively low civil society organization, and the withdrawal of expatriate staff.

Firstly, a more stable political and security situation would permit the resumption of the program of structural economic reforms, which was interrupted by the crisis in 1993. This unfinished agenda includes several reforms that are likely to have a direct impact on the incomes of poorer households, namely: (i) decreased reliance on export taxation, which should improve coffee producer prices; (ii) accelerated liberalization in the pricing and marketing of cash crops; and (iii) simplification and reduction of tariffs, which should encourage growth in labor intensive industries. In addition, a number of reforms that aim to improve fiscal sustainability, the efficiency of the civil service, and the poverty incidence of public expenditure remain outstanding, namely: (i) improved transparency of budget allocation and execution; (ii) further increases in budgetary allocations to the social sectors; (iii) rapid progress on privatization, and use of funds generated for public investment; and (iv) civil service reform, including a review of incentive and benefit structures. These reforms are critical for the success of poverty reduction strategies, once conditions have stabilized, in providing for a more effective civil service to implement development strategies, and higher current expenditure on the social sectors to staff, equip and maintain investments in infrastructure.

Secondly, macroeconomic reforms and a long-term solution to the conflict would permit more comprehensive development investment. Priorities for investment under these conditions would include: (i) geographical and sectoral expansion of infrastructure rehabilitation and public works programs; (ii) programs to address structural reforms in agriculture, including a review of land reform options, investment in marshland drainage, fertilizer promotion, rural finance programs and the strengthening of extension services; (iii) a line of credit programs and vocational training for the urban private sector; (iv) in health, the development of more sustainable finance mechanisms, an expansion of contraceptive promotion programs to limit population growth, and more vigorous efforts for AIDS prevention; and (v) in education, the resumption of investment to expand secondary school enrollment and achieve universal primary education.

The need for action

The situation remains very fragile for the majority of the population. Greater intervention is urgently needed in social protection to diminish vulnerability to a full-scale humanitarian emergency. Responsible and visionary action by government and opposition groupings is needed to ensure that political conflict does not further jeopardize the prospects for recovery, and to maximize the poverty orientation of public policy and expenditures. Given the limitations on domestic revenues, a resumption of international aid flows is also desirable to assist in financing initiatives to protect households from the vulnerability caused by five years of insecurity. Without public assistance in rebuilding their asset base, poor households in Burundi remain too vulnerable to income shocks, and are unable to break out of the vicious cycle of declining incomes, ill health and malnutrition. As a farmer interviewed during the participatory poverty assessment described the problems posed by the downward poverty spiral of the last five years: "if the public powers do nothing to break this circle, we will all disappear."

Under these circumstances, what can be done?

While there is little-to-no potential for growth-oriented development interventions under current circumstances, there is scope for undertaking basic social protection initiatives that will help preserve Burundi's human and social capital and prevent further deterioration of social indicators. Such initiatives should: (i) be targeted regionally, to take account of the dramatically different conditions prevailing in different geographical areas; (ii) be designed and implemented through a participatory approach that increases community involvement in project design and community ownership of local infrastructure; and (iii) combine efforts to rehabilitate infrastructure in the more stable rural regions, with activities to boost household incomes, to ensure that households can access the services provided.

Appropriate mechanisms for delivering social protection initiatives include the use of social fund or community development project instruments, which can work directly with communities to ensure that projects are sustainable and respond to priority needs. Priority activities for social protection under such projects should include: (i) "jumpstart" distribution of inputs and seasonal credit for agricultural activities; (ii) group grants and/or loans for agricultural investment and for rural non-agricultural activities; (iii) labor-intensive public works programs for local infrastructure rehabilitation; and (iv) credit for informal sector enterprises in urban areas. These will need to be backed up at the national level by efforts to strengthen agricultural extension services; continued financing of medical imports and initiatives to strengthen pharmaceutical distribution channels; and teacher training for new unqualified teachers, together with provision of school materials.

To ensure a minimum level of sustainability for these social protection initiatives, the critical short-term issues in macroeconomic management are control of the fiscal deficit and an improvement in the structure of government expenditure. In other words, ensuring that any gains in social protection are not immediately eroded by escalating inflation, and ensuring that sufficient current expenditures are allocated to the social sectors to protect investment in infrastructure rehabilitation. To be sure, macroeconomic management will continue to be "crisis management" as long as military instability and the embargo persist, but even within these fairly rigid constraints, some actions may be taken to improve outcomes. These include: (i) actions to increase revenue, through the elimination of all discretionary tax and customs duty exemptions;¹ a concerted effort to collect back taxes; and programs to increase the efficiency and effectiveness of the revenue departments; (ii) a reorganization of the budget to increase the poverty incidence of government spending, in particular through a phased reduction in military expenditures; a reduction in the subsidy to secondary schooling (accompanied by an increase in the school fee); and the imposition of hard budget constraints on all public enterprises.

What could be achieved if the economic and political context improved?

The political situation remains fluid; the government has recently launched an initiative to debate revisions to representational structures and constitutional powers, with the aim of reaching a more stable political consensus. If this initiative bears fruit in halting civil conflict and dismantling the embargo, a more comprehensive range of poverty reduction initiatives would be possible.