October 26, 2012 / 9:46 AM / 7 years ago

Burundi grows, but still falls short: finance minister

BUJUMBURA (Reuters) - Burundi expects its economy to expand by 5 percent annually over the next three to four years, still below the rate needed to lift it out of poverty, the country’s finance minister said.

The central African nation of eight million people projects this year’s growth at around 4 percent. It relies heavily on external aid to fund state spending with donors expected to provide 60 percent of its 2012 budget.

With relative peace since rebels joined the government in 2009 after almost two decades of civil war, it is now working to quit the list of least developed countries and to start self-financing its national budget by 2025.

So far it is falling short.

“In order to reach this vision, we need sustained growth of 5 to 7 percent but what we are expecting now is about 5 percent,” Finance Minister Tabu Abdallah told Reuters in an interview late on Thursday in the capital Bujumbura.

Abdallah said the country, which is also a member of the five-nation east African common market, would continue to raise budget allocations to its economic mainstay of agriculture in a bid to boost tea and coffee exports.

“Two years ago, the share of agriculture in our national budget was about 2 percent but now this percentage share is going up and up and now 11.8 percent of our budget is put towards agriculture,” he said.

The World Bank has ranked Burundi among the most improved economies worldwide on regulatory reforms, which include a new centralized revenue authority meant to maximize its tax base to allow it to cut its reliance on external budget support.

Burundi sees this rating as a springboard to seek hard currency from donors to help shore up its weak currency.

Abdallah blamed the country’s high inflation on the value of imports outpacing the exports by about $400 million annually.

This is causing the franc currency to weaken steeply. It has so far weakened by 10 percent this year to 1,400 per dollar, driving jumps in prices of food and fuel.

The minister said the ideal exchange rate for the franc was under 1,000 per dollar, where it was three years ago before lower donor budget support caused it to lose value sharply.

Inflation soared to 25 percent in April this year, forcing the government to act in the following month to remove taxes on imported essential commodities such as beans, rice and potatoes, after the soaring prices had prompted strikes in the capital.

Inflation fell to about 14 percent last month.

“We are facing high inflation because of the lack of external currencies due to the economic crisis in the world,” Abdallah said. “We don’t have enough from our partners and that is why are suffering from lack of hard currencies like dollars.”


At a donor conference scheduled to start in Switzerland on Monday, the government will ask its development partners to cough up $1.49 billion or 48 percent of the $3.2 billion required for key sectors such as education, peace, health and the environment, over the next four years.

The balance will be funded from revenue collections.

“If we get the support that we need during this Geneva conference, it will help to stabilize the Burundi franc,” the minister said.

Abdallah said infrastructure was key to Burundi’s plans for self-sufficiency, and the country needs to mobilize huge amounts of money to build roads, and mainly energy generation projects.

The government plans to generate an extra 100 megawatts (MW) of electricity in the next five years to help jump-start other economic activities such as mining, after nickel discoveries in the eastern part of the country near the border with Tanzania.

Abdallah said Burundi produces only 32 MW, and imports 20 MW is from neighboring Democratic Republic of Congo but this was still not enough, leading to frequent power blackouts.

“The biggest bottleneck is energy. We have a big energy deficit and that is why one of our major priorities is to improve the energy sector,” said the minister.

Editing by James Macharia. Editing by Jeremy Gaunt.

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