Burundi at a crossroads: the money matters

by Jason Braganza


What is happening?

The Republic of Burundi has, in the last few months, gone from being a stabilising post-conflict nation to being on the brink of disaster. In Burundi at a crossroads, Development Initiatives highlighted the potential reversal of gains made in the past decade.

The fast turn of events since our first post on the Burundi crisis has seen a failed coup to remove the President and arrests of the coup leaders; the assassination of the main opposition leader; an emerging refugee crisis that is spilling over into the Democratic Republic of Congo, Rwanda and Tanzania and a string of international donors starting to withhold aid to the country.

Burundi’s largest bilateral donor in 2013, Belgium, was the first European nation to suspend aid following violence erupting. Belgium has suspended €2 million of a pledged €4 million to assist with the organisation of the forthcoming elections. It has also pulled out of a €5 million police cooperation deal in Burundi, which it had in place jointly with the Netherlands. The European Union (EU) is withholding €2 million of €8 million worth of aid to Burundi designated for elections.

The Dutch government has suspended support to the police and army reform programme in Burundi stating it “…will only resume aid after circumstances have improved, calm has returned and all those involved have agreed to restore domestic peace.” However, programmes that are not connected to the current violence will continue. The French government has followed suit, suspending aid to Burundi’s police and defence services, which had been used to train the Burundian army for international peacekeeping missions and support the country’s armed forces.

The violence in Burundi has led to a refugee crisis. The United Nations High Commissioner for Refugees (UNHCR) states that more than 50,000 people have fled Burundi since early April, with at least half of them going to Rwanda; 18,000 have fled to Tanzania; and 8,000 to the Democratic Republic of the Congo. The emerging refugee crises in Burundi adds to the poverty pressure facing the fifth poorest country in the world and the lowest ranked country according to the human development index in East Africa.

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The money matters!

The ongoing crisis and suspension of aid by some donors is a significant step for  a country that has the worst human development index ranking in East Africa. With limited domestically generated resources, aid provides a major revenue stream for financing poverty-reducing interventions as well as stabilising programmes.

Using DI’s comprehensive Development Data Hub statistics reveals that approximately 55.9% of Burundi’s domestic revenue comes from external grants in the form of aid. Breaking this down shows the relative importance of aid to the country and puts in context the seriousness of the aid suspension by some donors.

In 2013, total gross aid to Burundi stood at US$552 million, up from US$ 514 million, in 2006. Of the countries and development agencies that have suspended aid: Belgium is the largest donor at US$63 million or 11% of total bilateral aid; Netherlands at US$31 million or 6% of bilateral aid; France at US$16 million or 3% of bilateral aid; and the EU at US$72 million or 13% of bilateral aid.

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Explore Burundi’s aid bundle

In terms of sector allocation, over 50% of the aid received goes towards the health, governance and security, and infrastructure sectors. These sectors are at risk of losing funding through the aid suspension, especially governance and security (see figure). This has significant implications for a country that stands at the edge of collapse and an increasing refugee crisis.

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Explore Burundi’s aid bundle

On the domestic front, conflict and instability has led to the Burundian franc sliding against the US dollar, leading to many Burundians rushing to exchange francs for hard currency before it weakens further. Economic activity is grinding to a halt; with the country’s tax collection system ceasing to function, this could affect the livelihoods of tens of thousands of government employees in the capital and other cities. “The government will not be able to pay salaries,” said Gilbert Niyongabo, a professor of economics at the University of Burundi. In the immediate medium term, the crisis is expected to filter down to the rural areas. As the harvest season approaches,  there could be no customers for the agricultural products if the current situation persists.

The crisis in Burundi has witnessed police violence; a failed coup against the President; the assassination of the opposition leader; the mass fleeing of Burundians to neighbouring countries; and the resource purse constrained as some donors suspend aid. The fifth poorest nation in the world is at a crossroad – decisions taken in the short term will have far reaching consequences.

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Contact:

Jason Rosario Braganza, Senior Analyst

T: +254 717 471