Economy of burundi

Economy of Burundi

Burundi's Economy 2003 -2005

Burundi's economy is based predominantly on agriculture, accounting for 44.9% of GDP in 2006. 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.

The main cash crop is coffee, which accounted for some 80% of exports in 2004. This dependence on coffee has 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.

Little industry exists except the processing of agricultural exports. Although potential wealth in petroleum, nickel, copper, and other natural resources is being explored, the uncertain security situation has prevented meaningful investor interest. Industrial development also is hampered by Burundi's distance from the sea and high transport costs. Lake Tanganyika remains an important trading point.

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.