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Burundi - Economy

The mainstay of the Burundian economy is agriculture, accounting for 44.9% of GDP in 2006. Despite the importance of agriculture, only a relatively small portion of the rural population has access to all-season roads. The road densities in areas of arable land are substantially lower in Burundi than elsewhere in Africa and in other low income countries.

Not only is access to infrastructure services limited, but the poor state of infrastructure leads to substantially higher costs. Prices for services can be two to three times that of other countries, further undermining the competitiveness of Burundi business in regional and global markets.

Despite reconstruction efforts, gross national product continued to drop (US$102 in 2011 versus US$119 in 2007) due to a reliance on subsistence agriculture, un-diversified and low-value exports, weak infrastructure, weak governance and institutional capacity, inadequate access to funding, and very low private sector investment. Business surveys in Burundi consistently identify the cost of power and the poor reliability of the service as the single most important obstacle to increased business investment.

Its main export is coffee, of which in record years it managed to export around 40,000 tons. Coffee production is declining, due to internal troubles and overpopulation. The only other significant sources of foreign exchange are remittances by Burundians living outside the country, foreign aid and the local administrative expenses of foreign governments and international and non-governmental organizations.

By 2015 the macroeconomic outlook is broadly favorable, driven by continued public investment and a gradual recovery in agriculture; however, external vulnerabilities persist due to a protracted decline in coffee exports and high volatility of coffee prices. Under normal harvest conditions, inflation in 2015 was expected to remain in low single digits. Expenditure pressures in the context of the elections constituted a key risk to the fiscal outlook. Slow implementation of structural reforms has contributed to the reduction in budget support commitments for 2015 relative to 2014, with some donors also facing tighter budget constraints.

Less than 2% of the population has electricity in its homes, compared with 16 percent for Sub-Sahara Africa and 41 percent for other low income developing countries. Several infrastructure projects are underway to reduce Burundis energy deficit and foster the emergence of non-traditional exports. Countrys electrical capacity is expected to more than double by 2018. To meet the projected demand for power, the required generation capacity for Burundi would be about 600 MW by 2030, compared with less than 40 MW at present.

The proposed program for the power sector has six key objectives, including to increase the electrification rate from the current two percent of households to 25 percent by 2020 and at least 40 percent by 2030. By 2020, 85 percent of urban households would have continuous access to the national distribution network, and by 2030, one-third of all rural households would be linked to the grid.

Growth reached an estimated 4.7 percent in 2014, underpinned by a rebound in coffee production, strong momentum in the construction sector, and the implementation of major infrastructure projects, including fiber optics, hydropower and roads. Average headline inflation decreased from an average of 9 percent in 2013 to 4.5 percent in 2014, helped by falling international oil prices.

Little industry exists except the processing of agricultural exports. Industrial development also is hampered by Burundi's distance from the sea and high transport costs. Lake Tanganyika remains an important trading point.

Although potential wealth in petroleum, nickel, copper, and other natural resources is being explored, the uncertain security situation has prevented meaningful investor interest. National nickel reserves are estimated at about 285 million tons. The most important nickel reserves are at Musongati, which has estimated reserves of 180 million tons of laterite deposits, putting it among the ten largest known deposits worldwide that have not yet been developed. The Musongati field is part of the nickel belt that extends from southcentral Burundi to north-west Tanzania.

A number of international companies have expressed interest in commercial exploration of these mineral resources. Two possible options have been proposed at one time or another for the actual mining operation: one is the export of nickel ore; the other is the export of metal from a refinery at the mine site. Burundi is heavily dependent on bilateral and multilateral aid, with external debt totaling $1.4 billion in 2004. International Monetary Fund (IMF) structural adjustment programs in Burundi were suspended following the outbreak of violence in 1993; the IMF re-engaged Burundi in 2002 and 2003 with post-conflict credits, and in 2004 approved a $104 million Poverty Reduction and Growth Facility loan.

The World Bank is preparing a Transition Support Strategy, and has identified key areas for potential growth, including the productivity of traditional crops and the introduction of new exports, light manufactures, industrial mining, and services. Both the IMF and the World Bank assisted the Burundians in preparing a Poverty Reduction Strategy Paper, released in February 2007. More than 81% of Burundians live below the poverty line. Serious economic problems include the state's role in the economy, the question of governmental transparency, and debt reduction.

Based on Burundi's successful transition from war to peace and the establishment of a democratically-elected government in Burundi in September 2005, the United States Government lifted all sanctions on assistance to Burundi on October 18, 2005. Burundi also became eligible for trade benefits under the African Growth and Opportunity Act in December 2005.

Burundi - Agriculture

Economic reform was interrupted by the tragic civil conflict that broke out in 1993, which led to large-scale destruction of the economy. Between 1993 and 2000, GDP is estimated to have fallen by almost 30 percent. Agricultural production, the pillar of the economy, virtually collapsed. Coffee production declined, thus undercutting export earnings; the area under cotton cultivation also declined as farmers fled and fields were abandoned. The situation was exacerbated by the regional blockade (respected by international partners) in effect from 1996 to 1999, which cut off international financial support, slowed imports, and led to food and fuel shortages and inflation.

Due primarily to the socio-economic crisis that began in 1993, agricultural production declined significantly, but general degradation of land and inefficient farming techniques are also strong factors. Livestock production also declined following vandalism and the reduction of pasture space during the 1993 crisis. The lakeside populations of Lake Tanganyika and the northern lakes practice small-scale fishing, most often with unsuitable nets, reducing the fish stocks.

Agriculture supports more than 90% of the labor force, the majority of whom are subsistence farmers. Although Burundi is potentially self-sufficient in food production, the civil war, overpopulation, and soil erosion have contributed to the contraction of the subsistence economy by 30% in recent years. Large numbers of internally displaced persons have been unable to produce their own food and are dependent on international humanitarian assistance. Burundi is a net food importer, with food accounting for 13% of imports in 2003.

Approximately 80 percent of the estimated population of 10.88 million lives below the poverty line, less than US$1.25 per day, which has serious repercussions on the ability of households to meet basic needs (for example, 81 percent must sell assets or borrow money to cover health costs.

The main cash crop is coffee, which accounted for some 80% of exports in 2004. This dependence on coffee increased Burundi's vulnerability to fluctuations in seasonal yields and international coffee prices. Coffee processing is the largest state-owned enterprise in terms of income. Although the government has tried to attract private investment to this sector, plans for the privatization of this sector have stalled. Efforts to privatize other publicly held enterprises have likewise stalled. Other principal exports include tea, sugar, and raw cotton. Coffee production, after a severe drop in 2003, returned to normal levels in 2004. Revenues from coffee production and exports are likewise estimated to return to pre-2003 levels.

Many households in Burundi practice subsistence agriculture because of several factors including limited land holdings, low productivity, and few income-generating opportunities outside agriculture. Maize is the dominant cereal, produced by 87% of households during the 20112012 season A. Sweet potatoes can be grown essentially year round, which contributes to their popularity as a staple food crop. Cassava is generally ground into flour and is considered a lower-cost alternative to other food staples.

Beans are more prominent in areas of greatest population density where there are few alternative protein sources. Beans are considered a higher risk crop than maize and tubers because they are more vulnerable to pests (viruses and fungi) and because untimely rains during the flowering stage cause very low yields.

Low productivity characterizes every aspect of Burundis agriculture. Production trends for food crops in Burundi since 2007 have been mostly a mixture of stagnant or falling production with some positive signs compared to average production from 2000 through 2006 with rice, banana, and sweet potato production show an increasing production trend since 2000.

Cattle are not primarily a source of food, but are regarded as living gold, constituting a symbol of prestige and the most highly prized form of wealth. Cattle were, and to some extent still are, the basis of the patron-client relationship that dominates the social structure. An exchange of cattle usually confirms important agreements. For example, they are the preferred form of bridewealth, as illustrated by the popular saying, "Down with the franc, long live the cow, source of all life."

Traditional greetings such as "Amashyo" (May you have herds) and the response, "Amashongore" (I wish you herds of females); can still be heard. "Darling, your eyes are like those of a cow" is a profound compliment; and the Tutsi look upon the agriculturalists with disdain and pray to the symbol of superiority and wealth, "Thou, oh cow, spare me from the fatigue of the hoe." In 1970 it was still common for Hutu who had attained an improved economic status to demonstrate their position by walking their cattle down the main thoroughfare on Sunday morning.





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Page last modified: 14-12-2015 14:17:30 ZULU