Burundi Cracks Down on Growing Black Market Foreign Currency
Following a series of stringent new foreign exchange regulations, Burundi authorities have cracked down on black market currency traders. (TheEastAfrican)
The Bank of the Republic of Burundi (BRB), the country’s central bank, issued new regulations on September 17 strengthening restrictions on foreign exchange bureaus in the country. Since then, 40 black market foreign currency traders have been arrested since Burundi strengthened its measures against black market currency trading last month according to the Ministry of Public Security.
Burundi has been facing a shortage of foreign currency since 2016 when foreign aid to the country was suspended. Aid-giving countries decided to suspend their foreign aid to Burundi after President Pierre Nkurunziza decided to run for a third presidential term, a decision that opposition figures denounced as a violation of the agreement that ended the country’s civil war, which initially limited the president to two terms in office.
The scarcity is also due in part to new regulations issued by the Bank of the Republic of Burundi (BRB), the country’s central bank. In September, the BRB issued more stringent regulations on the country’s foreign exchange bureaus, making them a less reliable source of foreign currency. The new regulations include requiring foreign exchange bureaus to download new tracking software, increasing the minimum capital requirement, and lowering the currency withdrawal limit.
“Our clients do not get foreign currencies because we do not have enough of them,” said Alexandre Nsabimana, representative of the owners of foreign exchange offices in Burundi. “The central bank and commercial banks no longer give us foreign currencies and we are compelled to comply with the central bank regulations governing foreign currency exchange rate.”
As of October 2019, the BRB only has enough foreign currency to sustain three week’s worth of imports, making it virtually impossible to secure dollars for international business.
“If I was to walk into the central bank today to buy dollars, they won’t have enough. So how are we expected to import goods?” complained one anonymous trader in Bujumbura, the former capital and largest city in Burundi.
Due to the shortage, many Burundi small businesses are struggling to stay open. The shortage has depreciated the value of the Burundian franc which has made importing necessary foreign goods much more expensive for these businesses.
“We no longer make profits since we cannot continue increasing the prices of our goods in order to avoid losing clients,” said one anonymous businesswoman who imports wedding decorations.
Although the government has set an official exchange rate (1,876 Burundian francs to one US dollar), this official rate is reserved only for what the government deems are essential goods, such as fuel and fertilizer. Non-essential businesses are forced to import goods at the market exchange rate which is nearly double that of the government-set one (about 2,900 Burundian francs to one US dollar). The high exchange rate and the new regulations on foreign exchange bureaus have incentivized several Burundians to buy dollars on the black market in the Democratic Republic of the Congo to resell in Burundi.
Despite the shortage, the BRB appears set to stay the course with their new regulations on foreign exchange, citing the need to combat illicit foreign currency trading in the country. The 40 arrests therefore are likely to be only the first in a series of crackdowns related to black market currency trading.