Economic Costs of Civil Conflicts: The Case of Burundi

This study examines the effects of civil conflicts in Burundi on its economic performance. The analysis of the structural effects using a structural VAR model points to the long-lasting effects of a civil conflict shock on economic growth in Burundi. After 10 years, the effect on economic growth is still noticeable. The cumulative effect of a civil conflict shock is found to be a 7.1% decrease in economic growth over a horizon of 10 years. Using the Synthetic Control method, estimates indicate that the Burundian civil war led to an average GDP per capita decline of approximately 138 dollars per annum, compared to what it would have been in the absence of war. The average annual loss as a percentage of the counterfactual GDP per capita is 34%. The total monetary cost of the war during this period is estimated at USD 1514 per person and almost 10 billion USD for the entire country. The estimated effects are robust to placebo checks conducted. We compare these results with costs of conflict in other countries to better understand the relative financial burden of the civil war. The study highlights the need to consolidate peace to achieve long-term economic development in Burundi.