Burundi clamps down on forex black market

Saturday August 20 2016

Traders sell fruits and vegetables on a street in Bujumbura, Burundi. PHOTO | FILE |

Traders sell fruits and vegetables on a street in Bujumbura. Burundi could resort to import restrictions amid a clampdown on black market currency dealers whom it partly blames for a sharp drop in the value of the local currency against the dollar.  AFP

By MOSES HAVYARIMANA

Burundi could resort to import restrictions amid a clampdown on black market currency dealers whom it partly blames for a sharp drop in the value of the local currency against the dollar.

The country has already imposed restrictions on food exports to Rwanda in a bid to keep inflation down — it is currently at three per cent — in the face of a looming drought.

About 15 foreign exchange bureaus have been closed and a dozen money lenders arrested for violating foreign exchange laws, according to police spokesman Pierre Nkurikiye.

“There is some kind of speculation that has led to the fluctuation. When there is a shortage of foreign-exchange reserves, we need as a country to adjust our needs. We cannot import if we don’t have foreign currency,” Audace Niyonzima, the director of research and statistics at the Burundi Central Bank said.

The Burundi franc has over the past one month lost 34 per cent of its value to trade at Bf2,700 to the dollar, down from Bf1,800 units to the greenback.

As of Friday, the official exchange rate was Bf1,670 to the dollar but the black market was offering Bf2,400 to the dollar.

Despite the actions on the black market, the government views the depreciation as the impact of aid withheld from the country by the European Union in the wake of President Pierre Nkurunziza’s controversial bid for a third term in office last year. 

“The decrease in the foreign reserves was amplified because of the crisis and by the donors who have suspended their aid to Burundi,” Mr Niyonzima said.

The European Union suspended budget support to Burundi but continued direct assistance through humanitarian aid.

The Burundi government expected 430 million euros from the European Union between 2015 and 2020 or 86 million euros a year. The withholding of aid forced the country to revise its budget substantially, especially after Belgium which contributed more than half of the budget, withdrew its support.

The government has also decreed that all monies meant for projects must pass through the Central Bank to avoid diversion of funds to non-priority areas.

Some forex bureaus have closed shop after the Central Bank prescribed exchange rates that were about 40 per cent higher than those in the black market. “We have to go to the black market and change or buy dollars because it is more representative than in the forex bureau,” said a businessman in Bujumbura.