Question 22M.3.HL.TZ0.b
| Date | May 2022 | Marks available | [Maximum mark: 10] | Reference code | 22M.3.HL.TZ0.b |
| Level | HL | Paper | 3 | Time zone | TZ0 |
| Command term | Recommend | Question number | b | Adapted from | N/A |
Burundi is a landlocked country in Central Africa. Its economy is heavily reliant on the agricultural sector, which employs 92 % of the labour force but contributes only 40 % of gross domestic product (GDP). Most of the 11.5 million population live in poverty, especially in rural areas. The level of food insecurity (people without access to enough food) is almost twice as high as the average for sub-Saharan African countries with more than 60 % of the population living below the poverty line.
Infrastructure in Burundi is poor. There are no railroads and only three major routes through the country, two of which involve water transport, across Lake Tanganyika. Access to clean water is low, while fewer than 5 % of the population have access to electricity. The literacy rate for those aged 15 and over is 61.6 %, while only 1 % of secondary schools have access to the internet.
Table 1: Labour market data for Burundi (2019)
Approximately 92 % of the labour force are employed in agriculture, which contributes 40 % of Burundi’s GDP.
Trade
The main exports of Burundi in 2018 were gold (41.4 %), coffee (17.3 %) and tea (9.5 %), while refined petroleum (17.3 %) was its main import. Although the current account deficit was reduced to 10 % of GDP in 2019, there remains a huge imbalance between exports and imports. Reserve assets do not cover more than one month of imports, while the economy relies on foreign aid and foreign direct investment (FDI) to finance the deficit. The low level of foreign aid is likely to be insufficient to finance the deficit.
On the upside, Burundi has an abundance of minerals, including 6 % of the world’s nickel reserves. It is the only African country producing rare-earth minerals, which are used in many hi-tech products, such as smartphones. The United States (US) has been keen to diversify its supply of rare-earth minerals because of its trade dispute with China.
Figure 1 shows the market for gold in Burundi. Dd and Sd represent the yearly domestic demand and supply functions for gold, while Sw and Sw1 represent the world supply of gold in 2019 and 2020 respectively. The price of gold is measured in US dollars (US$) per ounce (oz). The world price increased from US$1500 per oz to US$1800 per oz between July 2019 and July 2020.
Figure 1
Government finance
The budget deficit of Burundi increased in 2019, partly due to an inefficient system for collection of taxes. Tax rates in Burundi are given in Table 2.
Table 2
* Top rates of personal income tax in other countries are often much higher,
such as 57.2 % in Sweden and 35 % in Mexico.
A firm in Burundi paid 32 000 Burundi francs (Fbu), including VAT, in order to purchase a piece of industrial equipment. The rate of VAT for this equipment is 20 %.
Gender inequality in Burundi
Table 3 illustrates selected indicators of gender inequality in Burundi compared with Mexico and Sweden.
Table 3
[Source: United Nations Development Programme, 2020. The Next Frontier: Human Development and the Anthropocene [online] Available at: http://hdr.undp.org/sites/default/files/Country-Profiles/BDI.pdf [Accessed 20 April 2020]. Source adapted.
The World Bank, n.d. Population, total – Burundi [online] Available at: https://data.worldbank.org/indicator/SP.POP.
TOTL?locations=BI [Accessed 20 April 2020]. Source adapted.
United Nations Development Programme, n.d. Human Development Reports [online] Available at:
http://www.hdr.undp.org/en/countries/profiles/BDI [Accessed 20 April 2020]. Source adapted.]
Using the text/data provided and your knowledge of economics, recommend a policy which could be introduced by the government of Burundi to reduce income inequality in Burundi.
[10]
Refer to paper 3 markbands, available under “your tests” tab > supplemental materials.
Possible policies may include (but are not restricted to):
- a more progressive tax system
- investment in human capital (education or health)
- policies to promote women’s empowerment
- transfer payments
- wider tax base (more effective tax collection/reducing tax avoidance)
- policies to reduce inequalities of opportunity
- transfer payments
- targeted spending on goods and services, including merit goods
- policies to reduce discrimination
- minimum wage legislation
- any other valid policy.
N.B. If more than one policy is recommended, only the best policy should be rewarded, unless the policies are shown to be complementary or if they are compared/contrasted with the student’s one chosen policy.
A wide range of approaches were adopted for the “policy question”. Responses which scored well mostly:
- Selected one clear policy (or two complementary policies, such as increasing the higher rates of income tax and using the proceeds to provide transfer payments).
- Selected a policy listed in the subject guide, i.e. progressive taxes, policies to reduce inequalities of opportunity/investment in human capital, transfer payments, targeted spending on goods and services, universal basic income, policies to reduce discrimination, minimum wages.
- Ensured that the upper levels of the five strands set out in the markbands were satisfied – full explanation of an appropriate policy, incorporation of theory to support the explanation, use of relevant terminology throughout the response, use of data provided to support the recommendation and balanced synthesis/evaluation.
Responses were able to achieve full marks with a fairly concise answer which met these requirements. Diagrams, although not expected/required) were often used effectively to support the theory/explanation.
Candidates who did not score highly tended to demonstrate some of the following weaknesses:
- Outlining several policies while not explaining them in any detail.
- Writing long, unfocused answers.
- Neglecting to use the data provided to support the answer. Some candidates included data in a descriptive manner, which did not help to justify the recommendation. Responses which suggested increasing the rate of (progressive tax) and used the comparative rates in other countries correlated with the Gini coefficient to justify this approach were rewarded.
- Neglecting to provide a balanced synthesis. Many answers simply explained one or more ideas without any balance.
- Focusing on growth/development without making any connection to income inequality. Often this included a long explanation of several interventionist supply-side policies. Some focused on increased mining for minerals, arguing that the increased employment would reduce income inequality whereas it might arguably do the opposite.
- Using economic terms incorrectly e.g. classifying spending on (female) education as expansionary fiscal policy – even when the response suggested that it could be financed by a more progressive tax system.
- Devoting far too much time to explaining a Lorenz curve and Gini coefficient instead of explaining how the policy would achieve greater income equality.
- Focusing only on gender equality.
- Taking insufficient note of the data provided. Many responses suggested the adoption of a progressive tax system even though such a system already existed.
