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Burundi - An Agricultural Economy in the Heart of Africa

“In life-and-death matters such as the COVID-19 pandemic, a focus on financial matters can seem misplaced. But for the world’s poor, the financial impacts of COVID-19 can be devastating and far more immediate.” This overwhelming quote precisely describes the economic recession faced by Burundi in 2020, which added to its already struggling economy. Burundi is a landlocked country in the Great Rift Valley, where the African Great Lakes region and East Africa converge. A tiny, densely populated country of over eleven million inhabitants, Burundi faces rampant poverty due to its overpopulation crisis.


According to the EIU, agriculture is the largest contributor to Burundi’s economy, contributing 40% to the country’s gross domestic product (GDP), and employing more than 80% of its population. The primary exports are coffee and tea, which account for more than half of its foreign exchange earnings. The industrial sector transforms to varying degrees agricultural and forestry products such as cotton, coffee, tea, vegetable oil, and wood. We can hence conclude that Burundi is a developing economy with much of its industry being part of the primary sector, and much of its trade relies on agricultural exports (primary goods).


Burundi’s primary exports are crops such as coffee, tea, and wheat flours, as well as raw ores such as gold, niobium, tantalum, vanadium, and zirconium. The primary export destination is the United Arab Emirates (UAE), for a net value of over US$ 140 Million; Burundi also trades with its neighbour, the DR Congo, and China, Germany, and Pakistan, for between US$ 10 and 20 Million. Due to the massive imbalance in trade Burundi experiences, accumulating to about US$ 625 Million, the economy remains deeply in debt. As a result, its government has been unable to improve its transport infrastructure, which includes nearly 15,000 kilometres of crumbling roads used by less than 30,000 vehicles.


The Parastatal Regideso Company supplies most of Burundi’s power needs, but unfortunately only consist of 4 hydroelectric power plants dwarfed by the ones that lay across the border, in the DR Congo. Much of its electricity is imported from there as a result. Less than 1% of the population has access to clean fuel for cooking, and only one in ten Burundians have access to stable electricity, most of whom are concentrated in the cities of Bujumbura and Gitega. It also lacks an internet host, making telecommunications very limited and outdated. Despite the government supporting a joint venture with Kenya and Tanzania to offer international connectivity through the construction of a fibre network, access to such infrastructure remains a high-end luxury for most Burundians.

In Burundi, the top manufacturing industries are blankets, shoes, soap, beer, assembly of imported components and public construction. Its relatively small financial sector is dominated by banking, with over 75% of the economy’s assets belonging to it. Mining and energy remain important but underfunded industries in the rural reaches of the nation.


The unemployment rate is an important economic indicator that helps determine the health of an economy. The unemployment rate of Burundi fell gradually from 2.1 % in 2001 to 0.8 % in 2020. In 2020, the average inflation rate in Burundi amounted to about 7%, as compared to the previous year. It peaked in 1997 at 31% and was lowest at -4% in 2018, a deflationary rate (both as compared to the previous years respectively). As of World Bank statistics of 2019, Burundi’s GDP is a relatively meagre US$ 3 Billion, representing less than 0.01% of the world’s aggregate GDP. To make matters worse, real GDP growth has been falling for the past decade, with a rate of -3% in 2020.


Of course, it is no secret that 2020 was a terrible year for economies worldwide - the COVID-19 pandemic left businesses grappling for a foothold in the economy as the government struggled to impose effective lockdown measures against the virus. As Burundi’s real GDP contracted by over 3% in 2020, falling into a recession midway through the year, agricultural prices began to decline, and hence prices, for both domestic and imported products, rose sharply. The inflation rate rose to nearly 8%, breaking the steady deflationary cycle, and the exchange rate of the Burundian Franc against the US Dollar fell by nearly 4%.


Before the pandemic itself, access to basic necessities such as food, medicine and electricity were considered luxuries in a nation where 67% of the population lives below the poverty line. 58% of the population is chronically malnourished, with only 28% having a secure source of food. The continuous cycle of violence and war has been detrimental to Burundi’s economy, and is a significant cause of this sustained poverty. Along with this warfare and unrest, high infant and maternal mortality rates, the spread of infectious diseases such as malaria, diarrhoea, and respiratory issues, and the lack of sanitation due to contaminated sources of drinking water, severe malnutrition remains the leading cause of death in Burundi, a country with a low life expectancy of only 61 years.


There have been several attempts by the government of Burundi to improve the quality of life and standards of living of the people of Burundi. These policies generally work to ameliorate the industries of healthcare and education, yet this progress has been slow - even today, children in Burundi have a relatively low productivity of only 39% of the world’s productive potential, as measured by the Human Capital Index. To encourage the participation of the rural population in agricultural improvement efforts, the government has been financing schools and institutions which will train local agricultural promoters and extension agents. Local governments at all levels, regional development societies, cooperatives and other organisations are also working towards assisting farmers in the nation. In order to restructure and modernize the rural environment, the government has invested heavily in agricultural development, and so the prices of agricultural products have been raised repeatedly since 1976.


Yet this development has come at a cost to the government - Burundi’s public debt has risen sharply since 2015, when a spark in the civil unrest caused external funding to dry up. In 2020, public debt represents around 64% of its GDP, around US$ 2.1 Billion. This value has increased by over US$ 300 million over the course of just one year. Burundi hence experiences a very high debt per capita - US$ 182 per inhabitant.


This year, Burundi’s parliament passed the government’s planned budget of 1.7 Trillion Francs, which is the equivalent of US$ 870 Million, for the financial year starting from July onwards. This value also marked an 8% increase from the expenditure for the current fiscal year. In the government fiscal budget, the Finance Minister Domicien Ndihokubwayo had stated that 76% of the fiscal budget encompasses tax revenues, and the other 24% of the budget would be gathered from overseas aid.


Burundi’s history is fraught with revolution. Indeed, its original inhabitants, the Twa people, now make up only 1% of the population. The majority today are the Hutu, making up nearly 85% of the population, with the remainder being the Tutsi. Religious affiliations include Christianity and Islam, but most people retain their original animist beliefs and practices. Burundi’s entire culture is based on local traditions, with the influence of neighbouring countries. The culture includes mainly songs, dances, stories and legends. Decorated papyrus panels, which feature geometric patterns that appear to bear themes from the legends, are prized by ethnic art collectors, as are Burundian-made swords and war drums. These centuries old artefacts, while not contributing too much to the economy as a whole, remain a key component of the nation’s identity alongside others around the globe.



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Written By: Prajwal Namboodiri, Anvita Nadgir, Bhavna Gopalan, Nikhil Rajen

Edited By: Yashas Ramakrishnan




 
 
 

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