Burundi’s Debt Squeeze and Inflation Spiral

African Security Analysis Financial Alert (July 2025)

Executive Snapshot

Burundi’s public finances continue to walk a tightrope. Total public debt is now estimated at BIF 7.6 trillion—about 70 percent of GDP—after rising almost six-fold in ten years. Annual inflation hovers near 40 percent, foreign-exchange reserves cover little more than a fortnight of imports, and the 2025/26 budget relies heavily on new taxes that households already call “the hammer and the anvil.” An April IMF mission acknowledged last year’s growth rebound but warned that unresolved structural weaknesses keep debt-distress risk high. For banks, investors and aid operators, granular vigilance is essential: fiscal and monetary conditions can shift markedly quarter-to-quarter.

Debt & Liquidity Pressures

• Internal borrowing dominates. Roughly two-thirds of the debt stock is domestic, held by the central bank and state-linked lenders. Treasury bills have become the government’s primary cash bridge, squeezing commercial credit for agriculture, trade and start-ups.
• Servicing costs are onerous. More than half of recurrent spending now goes to salaries, security and debt payments, limiting development outlays and social transfers.
• External cushion is thin. Dollar reserves remain below USD 100 million; even mild commodity or climate shocks could trigger arrears pressure.

Inflation & Currency Slide

After dipping briefly last year, consumer-price growth re-accelerated: average inflation touched 39 percent in the first bimonthly data of 2025 and edged higher to the mid-40s by April. Key drivers are sizeable monetary financing of the deficit and a crawling-peg devaluation that has shaved other eight percent off the franc since March. Market stalls tell the story: a two-kilo maize bag costs nearly double what it did twelve months ago; urban bus fares are up by a third.

The 2025/26 Budget – Citizens “between Hammer and Anvil”

Faced with dwindling external grants, authorities unveiled a revenue-heavy budget that many Burundians view as punishing:

• Fuel, beverage and telecom excise hikes add immediate inflationary pressure.
• Travel documents up-priced: a passport now costs 300 000 BIF (up from 235 000 BIF) and driving-licence fees rose in tandem.
• Mining royalty lifted from 7 to 16 percent and a new levy on customs declarations introduced.
• Electronic billing machines rolled out nationwide to widen the VAT net and curb fraud.

Officials argue these measures will raise the tax-to-GDP ratio to about 14 percent and fund basic services; civil-society groups counter that the package deepens the cost-of-living crisis and risks pushing informal activity even further underground.

Growth & External Accounts

Real GDP expanded about 4.3 percent last year on the back of good harvests and public spending, but momentum is fading: 2025 growth is now pencilled in near 3 percent. Import rationing (fuel, spare parts) and sporadic power shortages hamper construction and services. On the external front, the current-account gap is narrowing—but only because import volumes have been forced down. Mining restart plans and stronger coffee prices could improve the picture from 2026 onward, yet tangible hard-currency inflows remain months away.

Donor Re-Engagement – Conditional Lifeline

The three-year IMF credit programme agreed in 2023 is disbursing on schedule, and Brussels and Washington have restarted project aid, but both tie future funding to:

• tighter monetary policy and limits on central-bank deficit financing.
• unification of the official and parallel exchange rates.
• governance upgrades in state-owned enterprises and the mining sector.

Meeting these benchmarks will decide how quickly concessional money can replace costly domestic borrowing.

What the Numbers Mean on the Ground

Liquidity is tightening faster than the headlines suggest.
Local banks have already crossed an informal threshold where more than half of their assets are tied up in Treasury paper. Conversations with branch managers in Bujumbura and Gitega reveal that, even after meeting statutory-liquidity ratios, only a modest slice of deposits is left for private-sector lending, and that slice shrinks every time the Ministry of Finance auctions a new bill. Investors who rely on local overdraft facilities or bridging loans should brace for approval times that stretch from weeks to months, and for interest-rate marks-up at least five percentage points above today’s advertised averages.

Further currency slippage is baked in.

The crawling-peg adjustment of eight percent since March did little more than close the gap with the informal market; it did not re-establish a true equilibrium price for the franc. Demand for dollars—fuel, medical imports, school fees—is rising faster than the central bank can supply. ASA’s base-case model points to another 10–12 percent step-down in the official rate before year-end, likely timed after the September coffee auction when foreign-currency inflows briefly improve the optics. Import-heavy projects would be well served by dual-currency clauses, staggered payment schedules or forward cover arranged out of Nairobi or Kigali.

The supply chain is becoming a security chain.
Diesel quotas and spot shortages have pushed hauliers to park trucks along the Bujumbura–Uvira lake corridor and divert cargo to unpaved feeder roads, where theft and informal checkpoint fees rise sharply. ASA field teams logged a 40 percent increase in cargo-interference incidents between April and June. Companies moving perishable goods or high-value spares now need multi-layer verification of trucking partners, escort coordination with provincial police, and on-site buffer stocks of at least one week for critical fuel and inputs—particularly ahead of the October–November rainy season, when road wash-outs spike.

Capital windows are opening—quietly but decisively.
Multilateral lenders are drafting a debt-management and export-diversification support package that could launch in early 2026. Conversations with programme architects indicate a strong appetite for blended-finance structures that pair concessional funds with private capital, especially in off-grid solar, agro-processing clusters around Ngozi and Kirundo, and strategic nickel or rare-earth plays under the revamped mining code. Early entrants who can furnish robust environmental- and social-impact documentation are likely to secure preferential slots once the new framework is signed.

Climate and social risks are converging.
Unseasonably heavy rainfall this year flooded 6 500 hectares of lowland rice outside Rumonge, wiping out an estimated 4 percent of national output and lifting local grain prices within days. That shock landed on top of already strained household budgets—raising the probability of urban unrest during the lean September-October period. Any operational plan must now treat climate volatility as a first-order macro risk, not a distant environmental concern. Satellite rainfall forecasts and village-level crop surveys should feed directly into security and market-demand models.

Taken together, these factors paint a landscape where finance, currency, logistics, and climate shocks interact in real time. Stakeholders who map only one dimension risk being blindsided by the next. ASA’s multidisciplinary monitoring—linking bank-balance-sheet data, FX order books, road-interdiction reports, and weather-sensor grids—offers a composite early-warning picture impossible to glean from raw macro statistics alone.

Conclusion

Burundi’s path to macroeconomic stability remains narrow. Pressures from costly domestic debt rollovers, persistent inflation, and the social burden of new tax measures are immediate challenges. Turning momentum will require disciplined monetary tightening, credible progress on export diversification, and sustained concessional support.

Over the coming year, African Security Analyses (ASA) will closely monitor three pivotal indicators: a sustained decline in monthly inflation, a net increase in concessional financing inflows, and a recovery in bank credit to productive sectors. Consistent movement across all three would suggest a durable shift in trajectory; setbacks on any front could trigger renewed stress.

For organisations operating in or exposed to Burundi—whether through capital investment, supply chains, or programme delivery—connecting macro shifts to operational realities is essential. ASA’s ongoing analysis draws on field intelligence, satellite data and macro-modelling to help decision-makers anticipate risks and calibrate response strategies. For further insight into how evolving conditions could affect your operations or investments, ASA provides scenario analysis, sector briefings, and tailored risk dashboards upon request.