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Backgrounds: Burundi Economy
The mainstay of the Burundian economy is agriculture, accounting for 41% of GDP in 2002. Agriculture supports more than 90% of the labor force, the majority of whom are subsistence farmers. Although Burundi is potentially self-sufficient in food production, the ongoing civil war, overpopulation, and soil erosion have contributed to the contraction of the subsistence economy by 30% in recent years. Large numbers of internally displaced persons have been unable to produce their own food and are dependent on international humanitarian assistance. Burundi is a net food importer, with food accounting for 9.4% of imports in 2002.
The main cash crop is coffee, which accounted for 50% of exports in 2002. This dependence on coffee has increased Burundi's vulnerability to fluctuations in seasonal yields and international coffee prices. Coffee processing is the largest state-owned enterprise in terms of income. In recent years, the government has tried to attract private investment to this sector, with some success. Efforts to privatize other publicly held enterprises have stalled. Other principal exports include tea, sugar, and raw cotton. In 2003, a combination of floods and insect infestation resulted in a severe drop in coffee production. Revenues are estimated to be less than one-fifth those in 2002.
Little industry exists except the processing of agricultural exports. Although potential wealth in petroleum, nickel, copper, and other natural resources is being explored, the uncertain security situation has prevented meaningful investor interest. Industrial development also is hampered by Burundi's distance from the sea and high transport costs. Lake Tanganyika remains an important trading point. The trade embargo, lifted in 1999, negatively impacted trade and industry.
Burundi is heavily dependent on bilateral and multilateral aid, with external debt totaling $1.136 billion in 2002. A series of largely unsuccessful 5-year plans initiated in July 1986 in partnership with the World Bank and the International Monetary Fund (IMF) attempted to reform the foreign exchange system, liberalize imports, reduce restrictions on international transactions, diversify exports, and reform the coffee industry.
IMF structural adjustment programs in Burundi were suspended following the outbreak of the crisis in 1993; the IMF re-engaged in Burundi in 2002 with a post-conflict credit. The World Bank has identified key areas for potential growth, including the productivity of traditional crops and the introduction of new exports, light manufactures, industrial mining, and services. Other serious problems include the state's role in the economy, the question of governmental transparency, and debt reduction.
To protest the 1996 coup by President Buyoya, neighboring countries imposed an economic embargo on Burundi. Although the embargo was never officially ratified by the UN Security Council, most countries refrained from official trade with Burundi. Following the 1996 coup, the United States suspended all but humanitarian aid to Burundi. The regional embargo was lifted on January 23, 1999, based on progress by the government in advancing national reconciliation through the Burundi peace process.
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