Risk Assessment in Financial Compliance in Burundi: A High-Risk Environment
Burundi, one of Africa’s most densely populated countries, faces a high-risk political and economic situation, making it challenging for companies to operate effectively.
Political and Economic Challenges
- Fragile political system marked by ethnic conflicts and military regimes
- Widespread poverty and corruption
- According to the Coface Country Risk Rating, Burundi is rated D, indicating a high risk due to its difficult business environment
- Business Climate Rating is E, reflecting the lack of available financial information and an unpredictable legal system
Economic Challenges
- Agriculture accounts for 80% of employment, but is characterized by low productivity
- Exports are mainly comprised of commodities such as gold, coffee, and tea
- Country relies heavily on foreign exchange royalties from mining activities to finance its budget
- Development of extractive sector has been suspended since 2021 due to lack of financial resources
- External account deficit financed by international aid and humanitarian projects in 2022
Financial Situation
- Precarious financial situation with a stock of accumulated debt and deficits that pose a severe risk to debt sustainability
- Debt structure expected to change in line with this trend, with internal debt expected to remain high in 2023
Political Instability
- Government has been seeking to restore trust both internally and externally, but efforts have been hampered by human rights violations and corruption
- President Evariste Ndayishimiye has dismissed his Prime Minister, raising concerns about the stability of the country’s political system
International Relations
- Burundi is working to improve its relations with neighboring countries, including Rwanda
- Country is seeking to strengthen its ties with China, which is an important partner and supplier
Conclusion
Burundi presents a high-risk environment for companies operating in the country due to its fragile political system, difficult business climate, and precarious financial situation. However, with the right approach and strategies, it may be possible to navigate these challenges and achieve success in this challenging market.