On the Burundian Economy

Published Date: Thursday September 8, 2011

On the Burundian Economy

One of the biggest challenges facing ordinary Burundians today is the price increase for basic goods.  Rice, cassava flour, beans, sugar, and (gosh!) beer have all become dearer in the last few months.  Rising fuel prices are the most often cited culprit, and for the last few weeks there has been a gasoline shortage that began when the government tried to force a price reduction.  (Economics 101.)  Although things have improved in recent days, last Friday the queues for fuel in Bujumbura stretched about a kilometre down the road, and there were limits on how much you were allowed to fill.  Public transportation suffered as a result: the minibuses has to reduce their schedules to wait in the fuel queue, and some drivers even parked their buses because their profits had dried up.

Cost-push inflation driven by rising commodity prices is a global phenomenon that manifests in many different local theatres.  During the uprisings in Tunisia and Egypt last winter, people were waving loaves of bread in the air to protest rising prices.  During the 2007-08 food price spike, riots occurred everywhere from Haiti to Mozambique to Indonesia, and today prices are even higher.  University of Malawi political science professor Blessings Chinsinga was summoned by the security forces in February for suggesting that the phenomenon could have a similar effect there.  The infringement on academic freedom provoked a stike by his colleagues that continues to this day, but the professor is vindicated as there are indeed fuel riots in his country.

The weak Burundian Franc, the fuel shortage, and the dry season’s impact on hydroelectricity have combined to cause major headaches for energy consumers.  The water and electricity agency REGIDESO (pronounced « régie des eaux ») doubled the unit price of both goods effective last week.  The city’s poor generally do not have electricity—entire sections of the city are off the grid—but they will still feel the pinch at their neighbourhood tap on top of their already inflated grocery bill.  To add insult to injury, electricity service hours were further reduced as there was not enough money to fuel the gasoline-based backup power plant. We now have 24-hr power outages every two days; it’s probably a good time to throw out that week-old lunch meat I have in the fridge.  (Generators are for wimps!)

The government’s fiscal situation isn’t any better.  Budget assistance from France is in jeopardy due to the conviction of Patrice Faye without due process, though belief in his innocence is far from unanimous around town.  Relations with Germany are strained due to a diplomatic faux-pas on the part of the Second Vice-President.  Worse still, Burundi’s biggest donor Belgium recently suggested that funding will be reduced if President Nkurunziza does not open a dialogue with the main opposition leaders.  In a country where the majority of the national budget is foreign donations—and a third of the rest comes from a single brewery—bad foreign relations affect the bottom line.   To be fair, tax revenues are up, but about a quarter of that money is stolen anyway.

The Central Bank of Burundi now finds itself in an awkward situation.  Any attempt to reduce the 9.1% inflation rate would likely depress the economy in the short run—politically unacceptable in these uncertain times.  The government must also continue to pay the security forces if the latter are to be expected to ward off a nascent rebellion and resist the temptation to mount a coup.  But if the Central Bank continues to print money to assuage the public service and keep up with inflation expectations, they risk sparking a hyper-inflation spiral like occurred in Zimbabwe.  Like too many African countries, Burundi is caught between a rock and a hard place, and the only way out is to beg.

To return to the Blessings Chinsinga's question, can these rising prices spark a revolt similar to what we saw in the Middle East?  The short answer is no.  Although food prices played a role, the Arab Awakening has complex set of factors including the large number of young, urban, educated, and globally-connected unemployed people.  Burundi’s youth fulfill that last category: virtually none of them have a steady job.   But nine-in-ten live in the countryside, half cannot read, most speak only Kirundi, and none but a tiny elite can use a computer.  To put it bluntly, this country is not yet developed enough to have an Arab-style revolution, no matter what Bujumbura's elite may think of the ruling party.

So if not a revolution, what is this so-called rebellion?  That is a contentious political question without a clear answer, which I must set aside for a future post.

I wish you all a good time at the CIGI campus grand opening.  I look forward to writing my MRP in the new building this winter.