The Burundi Central Bank (BRB) said the economy of Burundi showed signs of resilience in late 2025 despite persistent inflationary pressures and external sector challenges, as policymakers opted to loosen monetary policy while advancing financial-sector reforms.
In its Monetary Policy Committee report for the fourth quarter of 2025, the bank said “real gross domestic product growth is estimated at 4.4% for 2025, up from 3.9% the previous year, driven largely by improved agricultural output and investment linked to infrastructure and mining. Officials projected growth could accelerate to about 5.9% in 2026 if structural reforms and favorable weather conditions hold”.
The report noted that inflation remained elevated but showed signs of moderating toward year-end. Headline inflation averaged 28.5% in 2025, reflecting higher food prices, currency depreciation and imported inflation. However, monthly data indicated a gradual slowdown in price increases during the final quarter, which the bank attributed to tighter liquidity management and seasonal easing in food costs.
Against that backdrop, the central bank announced a significant policy shift. During its latest policy statement, it said it had decided to lower the key interest rate from 12% to 10%, continue modernizing the interbank market to increase transparency and strengthen monitoring of export revenue repatriation. The move marks the first rate cut in recent cycles and signals confidence among policymakers that inflation risks, while still present, can be managed.
Analysts say the rate reduction aims to stimulate credit to the private sector and support economic activity, particularly for small and medium-sized enterprises that have faced high borrowing costs. Commercial bank lending rates remain elevated, averaging above 16%, which officials say constrains investment and consumption. By lowering the policy rate, the central bank hopes to ease financing conditions and encourage banks to expand lending.
The monetary authority also emphasized reforms to deepen financial markets. Officials highlighted ongoing efforts to modernize the interbank market, including improved transaction reporting systems and enhanced oversight mechanisms designed to boost transparency and confidence among financial institutions. A more efficient interbank market is expected to help banks manage liquidity more effectively and reduce volatility in short-term interest rates.
On the external front, the report pointed to continuing pressure on foreign-exchange reserves, which remain below internationally recommended levels. The current-account deficit widened in 2025 due to higher import bills for fuel and capital goods, even as export earnings rose modestly on stronger coffee and mineral shipments. Authorities said stricter monitoring of export revenue repatriation would help ensure that foreign currency generated abroad returns to the domestic banking system, supporting reserve accumulation and exchange-rate stability.
The local currency depreciated during much of 2025, reflecting strong demand for foreign exchange and limited supply. The central bank said it intervened periodically in the foreign-exchange market to smooth excessive volatility while maintaining a flexible exchange-rate regime. Officials reiterated their commitment to gradually narrowing the gap between official and parallel market rates through policy reforms and improved market functioning.
Fiscal developments also shaped the economic outlook. Government spending rose during the year as authorities increased investment in infrastructure, health and education, partly financed by external concessional loans. While public debt remains manageable according to official assessments, the report noted that maintaining fiscal discipline will be essential to safeguard macroeconomic stability and contain inflationary pressures.
In the banking sector, indicators pointed to relative stability. Capital adequacy ratios remained above regulatory minimums, and non-performing loans declined slightly compared with the previous quarter. The central bank credited strengthened supervision and improved risk-management practices for the sector’s resilience. However, it cautioned that high inflation and exchange-rate movements could still pose risks to asset quality if economic conditions deteriorate.
Looking ahead, policymakers said the balance of risks to the outlook is “moderately tilted to the upside” for growth but warned that inflation could re-accelerate if supply shocks occur or global commodity prices rise. They also highlighted climate variability as a key uncertainty for an economy heavily dependent on agriculture.
Economists say the policy mix outlined in the report reflects a delicate balancing act. On one hand, authorities are seeking to support growth through lower borrowing costs and financial-market reforms. On the other, they must guard against inflation and currency instability in a context of limited foreign-exchange buffers.
The central bank said it stands ready to adjust policy as conditions evolve, emphasizing that future decisions will depend on inflation trends, exchange-rate developments and global economic conditions. For now, the rate cut and reform agenda suggest a cautious shift toward supporting economic expansion while maintaining vigilance over price stability.
Market participants will be watching upcoming data releases closely to assess whether easing monetary policy translates into stronger lending, investment and job creation. The effectiveness of export-revenue monitoring and interbank-market modernization will also be key indicators of whether the central bank’s strategy can bolster financial stability and reinforce confidence in the broader economy.
