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Burundi on the brink of economic collapse

03 June 2015, 07:00

Bujumbura - During Monday's truce in anti-government protests, Renovat Ndayizeye was quick to try to reopen his stall in Jabe market in Burundi's capital. He has scarcely sold a single pair of shoes since demonstrations began weeks ago, and he is getting desperate.

"I haven't worked since the protests began, we are living on our savings, and now I have nothing," said the 26-year old salesperson, surrounded by others who had taken advantage of a pause in the protests to reopen their small wooden shack shops.

Some customers did turn up to shop, but only for basic necessities like rice, meat, vegetables and soap.

Also Read: Burundi awaiting electoral body proposal for elections

Across the Burundian capital, business has been paralysed since demonstrators opposed to President Pierre Nkurunziza's third term bid began street protests, leading to almost daily, violent clashes with police. For over a month, customers have deserted the market and traders have left their goods locked up in the once teeming alleys.

The consequences of the political crisis in Burundi, and the protests primarily in its capital, are dramatic for traders like Ndayizeye, but also potentially disastrous for the country's already faltering economy.

Societal problems

The tiny Great Lakes nation was ravaged by a 13-year civil war that ended in 2006 and today is one of the poorest countries on the planet: gross national income per capita is $260, 58% of the population suffers chronic malnutrition, it exports very little, produces too little to feed itself and is riddled with corruption.

Many of the demonstrations have taken place on the outskirts of Bujumbura, fuelled by poverty and unemployment. This does not prevent them from playing the economic card, erecting barricades to prevent people from reaching their workplaces in order to hit the economy and force the president to abandon a third term bid they believe is unconstitutional.

Protesters are seeking to "turn Bujumbura into a dead city," fumed a senior official in the ruling CNDD-FDD party. "The impact of the demonstrations on the economy is real. It is a terrible weapon."

Painful times ahead

Even before the announcement of Nkurunziza's third term bid at the end of April, and the start of protests, the economy was suffering from a pre-election depression.

Fears of a return to large-scale violence in a country - which has a bitter history of inter-ethnic massacres - has driven people to change their Burundian francs for dollars or euros, and shelter their savings in their homes or in neighbouring Rwanda.

April tax revenues, collected mainly in Bujumbura, dropped 18%. The shortfall was worse in May which saw the closing of shops and banks, the blocking of roads into key areas of the capital and the fearful exodus of tens of thousands of Burundians to neighbouring countries.

Also Read: Burundi govt open to postponing elections

The dire economic situation is compounded by the effect of the political crisis on vital foreign aid, which accounts for half the national budget. Insecurity directly affects projects financed by donors such as the World Bank, whose experts were evacuated amid the violence leading to a reduction in disbursements.

Hard currency is already missing for the import of fuel, for hops used in production of the popular local beer, for medicines and for products such as charcoal used for cooking which has tripled in price. A leading local economist, speaking on condition of anonymity, has warned of looming hyperinflation.

Civil servant salaries

The ruling party official has said the salaries of civil servants will be paid in May, June and July. But that might come at a price, the economist said, with increased pressure on the Burundian franc, and therefore on prices, if the government were to print money or default on debt repayments.

Like the small scale traders in Jabe, the private sector lacks room to manoeuvre: the crisis and insecurity has hit private hotels hard and forced them to lay off staff.

An end to violence, however, may not be enough to revive the economy, especially if the election re-instates the president, analysts said.

Ignoring international warnings, Nkurunziza is preparing for five hard years at the head of an isolated country. Belgium, the former colonial power and a key donor to the country, has notably already suspended direct aid.

"After the elections it will be painful," said the CNDD-FDD official.



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