- IMF staff and the Guinea Bissau authorities have reached a staff-level agreement that could support the second review of the Extended Credit Facility supported program, subject to approval by the IMF Executive Board. Upon completion of the review, Guinea Bissau will have access to an additional SDR 2.37 million (about US$ 3.16 million).
- Performance has been satisfactory during the first months of the program, especially on the structural measures side. Raising domestic revenue, containing the wage bill and other current expenditure and transfers will be key to ensure fiscal and debt sustainability.
- Timely financial support from the international community, through grants and concessional lending, remains crucial.
Bissau: A team from the International Monetary Fund (IMF) led by Jose Gijon, Mission Chief for Guinea Bissau, held virtual meetings during May 17-22, 2023, and meetings in Bissau during May 23-30, 2023, to discuss the assessment of the Second Review of the Extended Credit Facility (ECF) arrangement[[1]]. The initial arrangement was approved for a total amount of SDR 28.4 million (about US$ 37.9 million) on January 30, 2023.
At the conclusion of the mission, Mr. Gijon issued the following statement:
"The mission team reached staff-level agreement with the authorities on economic and financial policies that could support the approval of the second review of the ECF-supported program. This agreement is subject to approval by the IMF Executive Board, which is tentatively scheduled for end-August 2023. Upon completion of the Executive Board review, Guinea Bissau would have additional access to SDR 2.37 million (around US$ 3.16 million), bringing the total IMF financial support under the arrangement to SDR 7.11 million (about US$ 9.48 million).
"Estimated economic growth has moderated in 2022 to 4.2 percent. The surge in commodity prices associated with the war in Ukraine, especially in food and fuel, brought average inflation to 7.9 percent and contributed to the widening of the current account deficit.
"In the context of a complex economic and political environment, the review focused on assessing progress in program implementation. Performance has been satisfactory particularly on the structural reform side. Five out of eight end-March 2023 quantitative performance criteria (QPC) have been met. The three missed targets were the floor on tax revenue which fell short due mainly to lower custom collection; the ceiling on wages was missed because some suspended public employees based on the last year's public service census have been reinstated through statutory appeals; the floor on the domestic primary fiscal balance was missed due to lower fishing revenue, higher than projected current expenses and the payment of invoices of the public utility company owed to the sole electricity provider.
"On the structural reforms side, all "structural benchmarks" for the second, and one for the third and fourth reviews have been already met. These include the initial installation of 10,000 pre-paid electrical meters to raise the revenue of public utility company, the increased transparency of public procurement, and other key measures in the areas of public financial management, expenditure containment, revenue mobilization and the rule of law.
"Going forward, decisive additional corrective measures need to be taken to improve the fiscal balance and gradually reduce public debt. Additional financial support from the international community, through grants and concessional lending, remains key for the successful implementation of the IMF-supported program.
"The team thanks the authorities for their openness, and constructive discussions and looks forward to continuous close cooperation through theExtended Credit Facility(ECF) arrangement over the next reviews. The next visit is scheduled to take place during the second half of September.
"The IMF team met with H.E. President Sissoco Embaló, Vice Prime Minister Sambu, Finance Minister Té, Minister of Economy Varela Casimiro, Minister of Foreign Affairs Barbosa, Minister of Public administration, Labor, Employment and Social Security Djaló, BCEAO National Director Cassama, President of the Court of Auditors Baldé. The team met with officials from the Primature, the Ministries of Finance, Economy, Fisheries, Justice, the National Directorate of the BCEAO, the National Institute of Statistics, the Financial Intelligence Unit, the procurement authorities and other officials. The team also met with representatives of public sector enterprises, as well as key bilateral and international partners."
Key links:
[1]The Extended Credit Facility (ECF) provides financial assistance to countries with protracted balance of payments problems. It supports countries' economic programs aimed at moving toward a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. The ECF may also help catalyze additional foreign aid.
