Tuesday 22 April 2008

Stagflationary pressures in Burundi

I mentioned last week that stagflation is a real possibility in the US and UK. Developing countries feel the same pressures - Burundi for example is experiencing imported inflation, as reported on the Burundi Quotidien site (http://www.burundi-quotidien.com/economie1.html - it's in French). The stagflationary effects are modified versions of the Western ones, since petrol prices are reportedly controlled in Burundi, so market shortages accompany price increases.

It is not clear whether the domestic financial system is simultaneously facing a debt crisis. The prominent Burundian bank Interbank in February reported a good annual performance (at http://www.interbankbdi.com/ibb_infos/nouvelles/ibb000110.htm, also in French), which is a little evidence that the Burundian financial sector has escaped some of the problems afflicting the Western sector. However, the African banking sector is increasingly heavily tied to Western banks through international ownership, so there may be an imported debt crisis. The financing or refinancing of government debt is likely to be made more expensive by the Western debt crisis, as states try to access Western finance.

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