(Bloomberg) -- Burundi’s central bank may cut interest rates by the end of this year for the first time since it shifted to utilizing borrowing costs rather than money supply to control inflation, its governor said.
The Central Bank of Burundi made the change in March, when it set the policy rate at 12% as part of reforms to unlock disbursements under a $271 million, 38-month International Monetary Fund program that started in July 2023. It also eased foreign-exchange controls last year that fanned inflation.
Annual inflation “will normalize in the future” and is expected to ease to 15% in December from 18.7%, “so we think that we could cut the current restrictive rate as inflation slows,” the bank’s Governor Edouard Normand Bigendako, said in an interview.
“The outlook is conducive for a cut” and that could happen by December, he said on the sidelines of the Association of African Central Banks’ annual meeting, in Mauritius, last week. “Our priority is to ensure that the supply of fuels become more regular, which would reduce price pressures.”
Ethiopia and Tanzania earlier this year also shifted to using interest rates rather than controls on private credit to curb inflation. Ethiopia’s move, like Burundi’s, was enacted to secure IMF funding and also came with currency liberalization.
Burundi is the world’s poorest country, World Bank data shows. The economy has been subjected to multiple shocks, including sanctions that were imposed during a 2015 political crisis, the coronavirus pandemic and an mpox outbreak.
Economic growth in the nickel producer is forecast at 4% in 2024 on the back of a better agricultural sector performance, and 4.5% next year, said Bigendako, who was appointed governor in October.
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