Burundi Economics Paper

Burundi Economics Paper

Introduction

Burundi is one of the countries in Africa whose Gross Domestic Product (GDP) has raised questions after a number of reforms were made in the recent years drawing attention of major stake holders including the World Bank and the International Development Association (IDA) who act as her major financial donors. Despite major political challenges Burundi’s GDP rates at 3.48 billion USD, a 0.01% representation of the world’s economy. Burundi’s GDP is defined by four major factors which include; agriculture, forestry and fishing; service; industry, and manufacturing1. These are discussed below.

Agriculture, forestry and fishing

According to the World Bank report, agriculture, forestry and fishing are the largest contributor to Burundi’s economy. This sector accounts for 40% of the country’s Gross Domestic Product (GDP) and more than 80% of employment. Burundi’s primary exports are coffee and tea. Statistically, Burundi’s export earnings solely rely on weather conditions and international coffee and tea prices. In March 2015, the World Bank approved 25 million USD that revived the transport, drainage, and climate following extensive flooding and landslides that damaged property. The move enhanced easy movement of agricultural products and equipment as well. This tremendous success of the agricultural sector has however been threatened by political disruption therefore a call to improve on the country’s security.

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1. World, Bank. Foreign Exchange Market and Macro-fiscal Impacts in Burundi-Preliminary Findings.Macro-Fiscal Global Practice Economic Monitoring. Internal Note, Unpublished, 2016

 Service

Service sector accounts for 39% of Burundi’s GDP. It is with no doubt that the International Development Association (IDA) has played a pivotal role in supporting Burundi’s efforts to improve the service sector of the economy. The core services reinforced include; healthcare and education. The World Bank report indicates that IDA is currently committed to 493.2USD under 8 national projects and 4 regional projects. Burundi has relatively a small developing financial service sector dominated by banking which controls over 75% of the country’s assets. The World Bank report indicates that Burundi has no established stock market to mobilize funds for investment but depends on 91day treasury bills to manage its liquidity within its sectors. For over 50 years, Burundi has developed due to micro financial institutions (MFIs).The national pension system (INSS) covers only 5% of Burundi’s population. In general, the financial sector faces a number of challenges ranging from; inadequate facilities for capacity building, shortage of experienced personnel to manage the sector, and need to strengthen the bank supervisory1. Strengthening bank supervisory directs improved the country’s economic productivity and growth.

Industry

Burundi’s industrial sector accounts for 16% of the country’s GDP. Success factors in this sector include; mining, energy production, telecommunication, technology advancement and credit to the private sector. Burundi’s Musongati mining area ranks among the top 10 known deposit of minerals such as tin, tantalum, tungsten, gold, and nickel2.

2.Nturampeba, Simon Pierre. Burundi-AFRICA-P157993-Burundi Maternal Child Nutrition Enhancement Project-Procurement plan. Washington, DC: World Bank Group, 2018.

These act as major industrial stimulators in the regions within as well as a center of attraction to other foreign investors.  Secondly, growth in the industrial sector has been enhanced by production of extra thermal power for improving transport, communication, and service delivery. For example, in 2015 May, a 60 million USD hydroelectric energy plant was established by Burundi’s energy and mines minister, Come Manirakiza. Additionally, the Kagu hydropower plant is a major boost to the country’s economic growth through industrialization. Since the inception of the mobile technology by Viettel, Burundi’s market has grown by over 80% year after year. Just after its inception, the country reported a 5.575 million mobile phones subscriber representing a significant growth of 49.9% from the previous one of 28.5%. Additionally, the launch of 25 million USD fiber optic cables is a major input in Burundi’s development agenda as far as connectivity is concerned3. Such an economic development agenda is a major boost to the economic stability of the country.

Manufacturing

Manufacturing ranks the least of all in Burundi’s GDP contributors with a 5% presentation. Being a landlocked country, Burundi has under-developed manufacturing sector. The poor performance in manufacturing is due to unpredictable civil war within the state scaring investors. This therefore accounts for the huge imports done by the Burundian’s. Increased importations in the country make Burundi’s exports unmarketable even within the country itself. The manufacturing sector imports most of the machines, tools, and equipment used in the production of goods and services to the citizens and thus its poor economic growth.

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Conclusion

Concisely, Burundi has a potential of growing its GDP as per the above discussion if proper security is enhanced in the state. It has been established that Burundi’s economy is thriving due to agricultural sector with a 40% contribution rate on the GDP, followed by service at 39%, industry at 16% and manufacturing at 5% of the total GDP.

References
Nturampeba, Simon Pierre. Burundi-AFRICA-P157993-Burundi Maternal Child Nutrition Enhancement Project-Procurement plan. Washington, DC: World Bank Group, 2018.

World, Bank. Country Assistance Strategy forthe Republic of Burundi. Report 72334, 2012.

World, Bank. Foreign Exchange Market and Macro-fiscal Impacts in Burundi-Preliminary Findings.Macro-Fiscal Global Practice Economic Monitoring. Internal Note, Unpublished, 2016.

 

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