Any transaction in foreign currencies is illegal within the country, says Diane Jocelyne Bizimana, Head of Public Relations and Communications office in Burundi National Bank (BRB).
In a press conference held on the 13th of July 2021, Jocelyne Bizimana pointed the finger to buyers and sellers over payment operations in currencies including USD and Euros.
“All transactions settled for goods and services based in Burundi or performed in Burundi are executed and paid for in local currency [BIF]”, says Bizimana.
She added that the instances of contracts and payments in foreign currency along with school fees breach the law, respectively the 4th and 58th articles of the Law on forex exchange in Burundi.
However, non-resident services such as airline travel agencies, international transport companies and agencies, freight forwarders, border and foreigners’ services, port and harbour services, and fiscal authorities can be invoiced and settled in foreign currency.
“Residents’ loans and guarantees in foreign currency are forbidden, provided that they are intended for payment of imports in foreign currency, unless the BRB grants an exemption”, reads the statement aside.
So far, Burundi’s currency insecurity came in 2016 when foreign aid (52% of annual State budget) was suspended by donors ahead of failure to meet funder’s obligations including ensuring a swift return to compliance with democratic principles and values, human rights and the rule of law.
As reported by the World Bank in Burundi, the East African country shifted to internal funding from which it managed to compensate for the loss of external resources. Yet, the social demand overwhelmed the initiatives driven by sustained population growth.
Due to lack of foreign currencies for imports and damages caused by COVID-19, inflation rose by 8.5 points to 7.6% in 2020, compared to –0.7% in 2019. The budget deficit doubled to 8.7% of GDP in 2020, compared to 4.2% in 2019, as current expenditures shot up about 4%.
In addition, weak global demand caused a 4.4% decline in coffee export prices and a 10.4% decline for tea. Trade and current account deficits deteriorated.
The current account deficit is 19.1% of GDP compared with a deficit of 17.8% in 2019. That resulted in a reduction in foreign exchange reserves, which could cover less than 30 days of imports at the end of 2020 as reported by the African Development Bank.