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Burundi’s economy has been challenged by the COVID-19 pandemic and Russia’s war in Ukraine. However, the economy is showing resilience, with economic growth expected to strengthen in 2022 to at least 3 percent, according to a recent assessment by the IMF.

Macroeconomic hurdles persist in Burundi, including deteriorating terms of trade and accelerating domestic inflation that is threatening already challenging living standards. The effects of the war in Ukraine have driven food and fuel prices up, with overall inflation at 20.9 percent at end-September 2022, from 10.5 percent at end-August 2021.

Before the war in Ukraine, the economic outlook of Burundi had been promising, with growth projected to a robust 4.7 percent in the medium term, supported by several positive effects including the impact of reforms, projects in the agricultural and mining sectors, and financial deepening. Economic growth prospects remain strong, also supported by the country’s progressive reengagement with the IMF and the international community more generally. The lifting of US and EU sanctions—a legacy of Burundi’s 2015 political and security crisis—is emblematic of this reengagement. This year, the IMF Executive Board completed Burundi’s first Article IV consultation since 2014.

With technical assistance from the IMF, the government is taking steps to reform its foreign exchange market, which if implemented, would help replenish the country’s international reserves. - Mame Astou Diouf and Jocelyn Koussere, International Monetary Fund

 

President William Ruto has offered a variety of promises to the agricultural sector that might revamp an area that urgently needs State intervention to feed a hungry nation and generate foreign exchange.

Speaking at the Mashujaa Day fete at Uhuru Gardens in Nairobi, the Head of Sate promised to continue financing fertilizer import subsidy in the short run and a joint East African manufacturing operation in the medium term.

“Agriculture, as the lead sector to the economic transformation of our country, is the place to start, owing to its potential for high and quick returns on investment,” said the president while acknowledging that the sector was in dire straits a country grappling with a severe food shortage and unaffordable inputs.

While in the campaigns when he was estranged from the Government of his predecessor and Jubilee party mate Uhuru Kenyatta, he had blamed failed State policies, this time the president blamed a prolonged drought in Kenya and the larger Horn of Africa region - the worst in nearly half a century, with three years of failed rains.

He also cited the most expensive global fertiliser prices in recent years but said relief food had been sent to the most vulnerable populations in Northern Kenya and his government had launched a fertilizer subsidy that would make life more bearable to farmers.

“Our government’s first intervention to address the fertilizer challenge and make it available to counties and regions that plant in the short rain season, was to import 1.5 million 50 kilogramme bags and distribute them at a lower cost of Sh3,500,” said President Ruto.

“We have also made arrangements to make another six million bags of various types of fertilizer available for the long rains season.”

He added that county governments had been asked to help in the last-mile delivery to centres close to farmers to help the prices remain affordable to farmers even where huge lifting costs are involved.

“In the medium term, the Government plans to have fertiliser manufactured (locally) in partnership with EAC countries in our region,” he added.

President Ruto said the long term solution to the national food crisis was putting more land under irrigation cutting the over reliance on unpredictable rain fed agriculture. Ruto’s govermment is seeking to construct 100 dams under a public-private partnership to progressively irrigate three million acres already identified as arable land.

“In the next three years, the government plans to double the land under irrigation to 1.4 million acres,” said the Head of State.

“Of these, 200,000 acres will be under rice irrigation and 500,000 under other food crops. Rice production in Bunyala, the Tana Delta, Rohole in Garissa, Mwea and Ahero will take priority.”

He admitted that a commitment by the Jubilee government to construct 50 large dams had been badly hit by financing hiccups due to the huge capital outlay against competing budgetary priorities - or simply put a tight budget. He also promised to reinstate the stalled milk coolers’ programme with distribution of 650 milk coolers in a policy that has identified dairy and livestock economy as sub-sectors with the quickest economic turnaround time and potentially key in improving food security, creating jobs and boosting exports.

On seed production, the president said the Government will work with local research institutions and both the public and private sectors to scale up seed multiplication for all crops. But his speech kept off the controversial Genetically Modified Organisms (GMO) crops issue with a zero mention of the same even after a recent announcement on the lift of ban on cultivation of this type of crops.

The president also spoke passionately about climate change blaming it for the three year drought cycle that has left pastoralist communities grappling with scarcity of pasture and on food aid saying this was the worst similar situation in the last 40 years. The current drought, he said had seen the country lose some 2.5 heads of livestock.

He proposed some interesting intervention include encouraging and helping tree planting Kenyans to earn carbon credit when they hit the target of planting 300 trees in their farms.

He promised that the Ministry of Environment officials will be under instructions to issue certificates to Kenyans who achieve the planting of 300 trees in their farms. - Wainaina Ndungu, The Standard

 

Burundi’s falling forex reserves are placing the country in dire straits, needing an urgent reboot of its monetary policy as it also faces high inflation.

This week, the Central Bank rescinded a two-year ban on individual recipients of forex from withdrawing cash in the original currency as part of efforts to “modernise” the country’s foreign policy and allow more flow of forex through private entities.

“The Bank of the Republic of Burundi is lifting, from today, the restrictions on the conditions for the settlement of instant transfers received from abroad, introduced on March 16, 2020,” Dieudonne Murengerantwari, Bank of the Republic of Burundi governor, said on Friday.

Since 2020, Burundi had barred forex bureaus and banks from dishing out foreign currencies to individuals. Those receiving money from abroad were forced to accept local currencies, even when the money had been wired to their foreign currency accounts. The bank now says all forex bureaus can reapply for licences to relaunch operations.

“Approval will be conditional on the signing of an act of commitment to compliance with the regulatory framework of exchange offices,” Murengerantwari said.

The bank announced changes in the wake of a report by the International Monetary Fund indicating that Burundi’s current account deficit is projected to widen this year due to increased imports for fuel, consumer and capital goods.

The high commodity prices have pushed inflation up, which stood at 19.6 percent in August, and compounded the country’s vulnerable external position.

Burundi is expected to continue grappling with the challenges of balancing social and development spending with the need to maintain macroeconomic stability and address debt vulnerabilities.

The IMF recommended a change in the current monetary policy stance while addressing inflationary pressures.

Burundi’s foreign exchange reserves fell to 1.6 months’ worth of imports at the end of July, down from 2.2 months’ worth of imports at the same time last year. IMF attributed this to increased import bill “not matched by capital inflows.” - The EastAfrican

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