The ongoing foreign exchange market liberalization policy is attracting public attention. On the foreign exchange market, there is a spectacular surge in the greenback. The value of the US dollar is skyrocketing. This worries business circles for a country which is substantially dependent on imports and which is sinking into an inflationary spiral. When imports are expensive, prices rise accordingly. We are talking regarding imported inflation. This is the case for Burundi which imports 35% to complete the food supply.
Benjamin Kuriyo, Director of publications
Economic operators follow with interest the behavior of the foreign exchange market which dictates the setting of prices. This Wednesday 1is March 2023, the greenback was worth 2,090 FBu on the official market once morest 3,890 FBu on the parallel market. It is important to point out that the parallel market reflects the economic situation of our country, especially since it finances imports up to 75%. For months, the Central Bank has been initiating a series of reforms to try to stem speculation around currencies and close the gap between the two markets. The new team at the head of the Bank of Banks is carefully considering the strategies to adopt while anticipating the actor behavior.
In this logic, the Central Bank has authorized the reopening of exchange offices. From now on, instant transfers of funds are authorized and hotels can collect foreign currencies. To reduce the gap between the black market and the parallel market, some anticipate and propose the outright devaluation of the FBu. The Prime Minister suggests prudential measures. Otherwise, the whole national economy risks collapsing. “The immediate devaluation of the currency risks igniting the situation, especially since speculators will take advantage of it to widen the gap,” he declared before Parliament meeting in congress.
In the current context, economists advise once morest spontaneous devaluation of the currency. ” Structural problems cannot be solved by monetary measures. If tomorrow the Central Bank sets the rate at 3300 FBu, the rate on the parallel market will be 4500 FBu and the cycle will continue “, lamented Professor Léonce Ndikumana during a conference-debate organized by the BRB last August.
The President of the Republic finds that the current economic situation has its origins in the financial disorder that has taken place since 2016 in terms of currency management and refinancing policy. He reassures that the country is getting out of it little by little and that the situation will be brought under control soon. “The situation is under control,” reads the Central Bank’s twitter account.
Thus, the Bank of the Republic of Burundi wishes to reassure importers and invites them not to be disoriented by the speculative rise in the US dollar still observed in recent days. For the moment, the BRB is beginning an action to identify the real importers with a view to properly organizing the interbank currency market. In the future, importers will be able to source their import needs from this market.
The Central Bank’s interventions in the foreign exchange market are in line with the major recommendations resulting from the national forum on the development of Burundi which was held in November 2021. During the meeting, the eminent professor Léonce Ndikumana had encouraged the government to initiate reforms. “Inaction is not an option. Every day that passes makes the problem more difficult to solve. And every day that passes discourages people who are waiting for solutions to this problem,” he said.
