The International Monetary Fund (IMF) is definitely the lender of last resort for African countries. Burundi became the latest African country to receive funds from the IMF. Indeed, the IMF approved a $271 million loan to Burundi on July 17, 2023. The loan is part of the IMF's Extended Credit Facility (ECF), which provides financing to countries with protracted balance of payments problems.
The IMF said that the 38-month loan will help Burundi address its current account deficit, rebuild its foreign reserves, and support the government's reform agenda. The loan also comes with conditions that require Burundi to liberalize its exchange rate, tighten credit conditions, and halt central bank loans to the state.
Burundi has been plagued by political instability in recent years, which has led to a decline in foreign investment and tourism. Burundi has, unfortunately, a long story of political instability. The country has experienced several civil wars, and there have been numerous coups and attempted coups.
In 2015, President Pierre Nkurunziza ran for a third term in office, despite term limits set by the constitution. This led to widespread protests and violence. The government responded by cracking down on dissent, and hundreds of people were killed. The country's political system is highly centralized, and there is a constant struggle for power between different elites.
Beyond the political realm, Burundi has also experienced a drought. Burundi is a landlocked country in East Africa, and it is highly dependent on agriculture. The recent drought has had a devastating impact on the agricultural sector, which has led to food shortages and price increases.
The COVID-19 pandemic has also had a negative impact on the Burundian economy. The pandemic has led to a decline in economic activity, and it has also made it more difficult for the government to provide essential services. The country never truly recovered from the pandemic.
As a result of these challenges, the Burundian economy has been struggling. In 2022, the country's GDP growth rate was estimated to be only 1.8%. Inflation is also high, and it is expected to remain high in 2023.
Burundi has a large current account deficit, which means that it is importing more goods and services than it is exporting. The IMF loan can help Burundi to finance its imports and reduce its current account deficit.
Moreover, Burundi's foreign reserves have been depleted in recent years. The IMF loan can help Burundi to rebuild its foreign reserves and improve its ability to meet its external obligations. The IMF loan is conditional on Burundi implementing a number of economic reforms. These reforms are designed to improve the country's fiscal and monetary policy, promote private sector growth, and reduce poverty.
The IMF loan is a significant financial lifeline for Burundi. The loan will help the country to address its current economic challenges and lay the foundation for sustainable growth. However, it is important to note that the loan comes with conditions that the government must meet in order to receive the full amount. If the government is unable to meet these conditions, the loan could be suspended or even canceled.