The Executive Board of the International Monetary Fund (IMF) approved today a thirty-six-month Extended Credit Facility arrangement for Guinea-Bissau in the amount of SDR 28.4 million (about US$ 38.4 million, or 100 percent of quota) for Guinea-Bissau to support the West African nation’s economic recovery and policies to improve governance, on Monday.
The IMF Executive Board decision enables an immediate disbursement of SDR 2.37 million (about US$3.2 million). Disbursements of the remaining amount will be phased throughout the programme, subject to two initial quarterly reviews—to ensure close monitoring of reforms, followed by five biannual reviews.
The IMF ECF-supported programme aims to anchor macroeconomic stability, putting the budget back on track and ensuring medium-term debt sustainability, while continuing progress on structural reforms initiated under the 2021-22 Staff Monitored Programme (SMP).
It will provide a framework to assist the authorities in designing and implementing effective policies to better address development challenges such as enhanced education and health systems, promote inclusive growth, and reduce poverty.
Fiscal policy will aim to reduce the deficit and debt in line with the West Africa Economic and Monetary Union convergence criteria over the medium term through revenue mobilization, expenditure rationalization, mitigation of fiscal risks, and prudent borrowing.
Further action to enhance governance including advancing Anti Money Laundering/Combating the Financing of Terrorism/ effectiveness will improve the management of fiscal resources and public investment, increase transparency and accountability, and counter corruption.
The IMF programme will also help catalyze much-needed donor financing, particularly in the form of grants and concessional loans, and support the reduction of debt vulnerabilities.
Guinea-Bissau‘s programme of economic policies and reforms implemented under the 2021-22 Staff Monitored Program helped maintain macroeconomic and public debt sustainability, as well as strengthen public financial management (PFM) and governance in the public sector.
Real GDP growth is estimated to have slowed down to about 3½ percent in 2022. It has been negatively affected by lower-than-expected cashew exports, which slowed mainly due to logistical constraints.
The surge in commodity prices associated with Russia’s war in Ukraine has added renewed pressures on inflation, especially in food and fuel. Growth has been supported by higher agricultural production, private sector investment, and relative political stability, which partially offset the impact of the higher cost of living and negative external shocks.
Following the Executive Board discussion on Guinea-Bissau, Mr. Li, IMF Deputy Managing Director and Acting Chair issued the following statement:
“Guinea-Bissau demonstrated a strong commitment to reform implementation in a challenging environment through its satisfactory completion of a nine-month Staff Monitored Programme. Looking ahead, while the economy is expected to rebound, the outlook is subject to significant downside risks related to domestic weaknesses, long-standing fragility, volatility in cashew exports, and spillovers from Russia’s war in Ukraine that could further impact food and energy prices. The new Extended Credit Facility (ECF) arrangement supports economic recovery and policies to create fiscal space for social and priority spending, reduce debt vulnerabilities, and improve governance and transparency.
“The program objectives include growth-supportive fiscal consolidation with reforms to improve domestic revenue mobilization, strengthen public finance management and wage bill control, mitigate fiscal risks, and safeguard social and priority spending. The authorities are expected to make significant progress in meeting the regional fiscal convergence criteria and strengthening debt management by the end of the programme period.
“Strengthening financial stability and intermediation, and addressing risks in the financial system are also important. In this regard, tackling the high level of non-performing loans and ensuring a timely and orderly disengagement from the undercapitalized bank would be key.
“Implementing reforms to strengthen governance and anti-corruption frameworks will be pivotal to the programme’s success. The authorities have implemented transparency commitments related to COVID-19 emergency spending—including the publication of the third-party audit and the beneficial ownership information. The authorities will also accelerate the implementation of beneficial ownership disclosure, modernize the asset declaration regime and improve the AML/CFT framework. Pursuing economic diversification is also key to strengthening resilience and achieving sustainable growth.
“The authorities are committed to the reform agenda to ensure fiscal sustainability, strengthen governance and management of public resources, mitigate fiscal risks, and rely on highly concessional financing. The authorities’ engagement with the IMF through the ECF arrangement will catalyze development partners’ support for resilient and inclusive growth. Making use of IMF capacity development would also support the implementation of reforms.”
