Burundi - Overview of economy

Agricultural production dominates Burundi's national economy. During the colonial period (1899-1962) the German and Belgian administrations forced Burundi's

workers to produce goods like coffee and tea for export to Europe. This pattern of production continues, while the mining, manufacturing, and service sectors are less developed.

Violence and political conflict between the Tutsi and Hutu ethnic groups plagued Burundi after its independence from Belgium in 1962. By the 1990s the instability caused by civil war, Burundi's landlocked status, its colonial legacy, a limited material base, and the general decline of investment in Africa throughout the 1990s led to an overall collapse of the economy. In 1986 the government agreed to a program of economic liberalization with the International Monetary Fund (IMF) and the World Bank. However, a brief but brutal resumption of ethnic massacres in 1988, and the resumption of the conflict in 1993, halted this program of economic development.

While Burundi's gross domestic product enjoyed an average annual growth rate of 4.4 percent between 1980-1990, during 1990-1999 the annual growth rate declined by an average of 2.9 percent. Agricultural production fell by 2 percent, industrial production fell by 6.7 percent, and services production fell by 2.5 percent annually during the 1990s. The failing economy was aggravated by an economic embargo imposed by regional and Western powers in an attempt to encourage Burundi's politicians to make peace. This embargo and economic instability contributed to the national economy's balance of payments deficit of US$54 million in 1998 and US$27 million in 1999.

In 1980 Burundi's total external debt stood at US$166 million, but with a government surplus of 9.8 percent of gross domestic product (including external aid) the country was able to pay interest on its debt. By 1998 Burundi's total external debt was US$1.12 billion while the government had a deficit equal to 5.4 percent of the gross domestic product. Burundi's financing of debt as a percentage of exports rose from 20.4 percent in 1985 to 40 percent in 1998, draining the foreign capital generated from exports. Due to the national crisis, external donors were reluctant to lend money to Burundi, and external aid per capita fell from US$53.1 in 1992 to US$11.6 in 1998. The country continues to rely on a decreasing level of foreign aid while it is unable to pay off debts. The inflation rate was recorded at 26 percent in 1999. At the dawn of the 21st century, Burundi was a country in deep economic crisis.

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Apr 20, 2011 @ 11:11 am
How the government of Burundi can contibute materially to economic stability

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