An International Monetary Fund (IMF) mission led by Mauricio Villafuerte visited Bissau during July 23-29, 2014 to discuss recent economic developments. The mission met with the authorities of the newly-elected government, including President Jose Mario Vaz, Prime Minister Simoes Pereira, and Minister of Economy and Finance Geraldo Martins. The mission also met with the National Director of the Banque Centrale des Etats de l'Afrique de l'Ouest (BCEAO) Joao Fadia and development partners. At the conclusion of the visit, Mr. Villafuerte issued the following statement:
"The mission conducted an assessment of economic developments and discussed a realistic policy framework for the remainder of the year, in particular the revenue and expenditure envelopes for the 2014 budget, which is being prepared by the authorities. Economic activity is expected to accelerate this year in the context of higher cashew export prices and a resumption of traditional donors' support. After growing by 0.3 percent in 2013, the mission estimates a GDP growth rate of 2.7 percent for 2014. Inflation has remained subdued and is projected to increase somewhat in the second half of the year as fiscal arrears are cleared and cashew farmers get better prices for their crops.
"The mission noted that the new government has been able to reduce wage arrears from four to two months and they will be fully regularized thanks to a grant from the World Bank and the recent placement of CFAF 15 billion (3 percent of GDP) in T-bills. The government deemed the latter's success as an important confidence signal on the country's economic prospects by private regional banks. The mission estimated that, to have a close to fully-operational government, its financing needs will surpass 9 percent of GDP in 2014. Covering those will hinge on the quick resumption of traditional donors' support, for which prospects are favorable. Approval of a fully-financeable 2014 budget will be critical to instill fiscal discipline, together with the implementation of measures to improve treasury management and the monitoring of budget execution.
"The mission stressed the importance of improving the business environment and enhancing the opportunities for inclusive growth. In this regard, the mission noted that high export taxes on cashew exports have increased rural poverty and smuggling through neighboring countries and reiterated a call for eliminating the contributions toward the cashew industrialization program (FUNPI).
"The mission looks forward to an active and continued dialogue with the authorities with the aim of addressing the country's economic and development challenges."