Burundi: Technical Assistance Report-Financial Sector Stability Review

In response to a request from the Bank of the Republic of Burundi (BRB), the Monetary and Capital Markets Department (MCM) of the International Monetary Fund (IMF) carried out a Financial Sector Stability Review (FSSR) mission from January 31 through February 13, 2024. The FSSR performed a diagnostic assessment of the financial system oversight framework, reviewed progress in implementing the technical assistance (TA) recommendations of 2019–2024, and developed a draft Technical Assistance Roadmap (TARM) to improve financial system stability by strengthening the BRB’s capacity. The mission identified three main macro-financial vulnerabilities: (i) the difficulty of assessing credit quality following the boom in lending in 2021–2022, worsened by the non-adherence to the International Financial Reporting Standard 9 (IFRS9) and to the rules on credit risk from the Basel Committee on Banking Supervision (BCBS); (ii) the risk related to exchange rate depreciation; and (iii) the sovereign-banks nexus. Moreover, given the concentration of assets (large exposures) and liabilities (deposits), prudential rules and regulations should be more rigorously applied and such concentration should be given greater consideration in supervision and stress tests. The report recommends strengthening the BRB’s supervisory capacity before enhancing prudential regulations, and addressing systemic risks through improved stress testing and a strengthened crisis management framework. Implementing these recommendations will bolster financial stability and support economic growth.