Washington, DC: 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).

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 over the duration of the program, subject to two initial quarterly reviews--to ensure close monitoring of reforms, followed by five biannual reviews.

The ECF-supported program 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 Program (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 to advance 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 program 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 program 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 higher cost-of-living and negative external shocks.

Following the Executive Board discussion on Guinea-Bissau, Mr. Li, Deputy Managing Director and Acting Chair, issued the following statement:

"Guinea-Bissau demonstrated strong commitment to reform implementation in a challenging environment through its satisfactory completion of a nine-month Staff Monitored Program. 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 program 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 program'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."

Guinea-Bissau: Selected Economic and Financial Indicators, 2019-27

2019

2020

2021

2022

2023

2024

2025

2026

2027

Est.

Proj.

(Annual percent change, unless otherwise indicated)

National accounts and prices

Real GDP at market prices

4.5

1.5

6.4

3.5

4.5

5.0

5.0

5.0

5.0

Real GDP per capita

2.3

-0.7

4.1

1.2

2.3

2.8

2.9

2.9

2.9

GDP deflator

-3.5

-1.0

2.7

7.2

4.1

2.8

2.8

2.8

2.8

Consumer price index (annual average)

0.3

1.5

3.3

7.8

5.0

3.0

2.0

2.0

2.0

External sector

Exports, f.o.b. (CFA francs)

-22.7

-15.6

35.2

-10.7

34.2

4.4

3.6

3.5

4.2

Imports, f.o.b. (CFA francs)

20.5

-9.9

9.7

12.8

12.6

4.7

4.3

3.7

4.5

Export volume

13.5

-13.8

25.5

-22.2

19.2

2.9

2.5

2.5

2.4

Import volume

12.8

-5.8

-5.9

-14.5

10.3

5.6

5.7

4.8

4.6

Terms of trade (deterioration = -)

-31.8

-3.9

-6.6

-9.8

2.7

2.6

2.6

2.2

2.0

Real effective exchange rate (depreciation = -)

-2.8

2.3

1.4

...

...

...

...

...

...

Exchange rate (CFAF per US$; average)

585.9

574.8

554.2

...

...

...

...

...

...

Government finances

Revenue excluding grants

9.2

-5.5

22.7

4.6

14.1

10.8

10.5

9.6

9.8

Domestic revenue (excluding grants and one-offs)

9.2

-5.5

22.7

4.6

14.1

10.8

10.5

9.6

9.8

Expenditure

-2.6

33.8

7.8

-3.3

2.7

5.7

8.4

7.3

9.6

Current expenditure

18.7

14.5

3.5

5.4

-4.4

4.3

6.5

7.9

8.6

Capital expenditure

-38.5

96.7

16.1

-17.9

18.2

8.3

11.6

6.3

11.2

Money and credit

Domestic credit

13.8

-1.7

18.5

3.4

11.2

12.9

11.1

6.7

5.9

Credit to the government (net)

13.8

-19.7

53.4

-5.1

6.4

5.7

3.2

-7.9

-9.2

Credit to the economy

13.8

5.9

7.3

7.3

13.2

15.6

13.8

11.3

9.9

Net domestic assets

12.0

-13.8

21.0

5.1

16.5

18.0

14.9

8.7

7.6

Broad money (M2)

0.3

9.1

21.2

6.1

6.0

7.0

6.9

6.0

6.2

(Percent of GDP, unless otherwise indicated)

Investments and savings

Gross investment

16.2

17.5

18.1

18.5

17.8

19.7

20.6

21.2

22.1

Of which: government investment

3.0

5.8

6.2

4.6

5.0

5.0

5.2

5.1

5.3

Gross domestic savings

2.4

3.2

7.4

4.3

4.8

7.2

8.3

9.4

10.6

Of which: government savings

-3.5

-7.6

-5.4

-4.3

-2.4

-1.6

-1.2

-1.3

-1.2

Gross national savings

7.6

15.0

17.3

12.6

13.1

15.2

16.3

17.0

18.1

Government finances

Revenue excluding grants

12.1

11.4

12.8

12.1

12.7

13.0

13.3

13.5

13.7

Domestic primary expenditure

13.5

16.0

14.7

14.9

12.9

12.4

12.6

12.8

12.9

Domestic primary balance

-1.4

-4.6

-1.9

-2.8

-0.2

0.6

0.7

0.7

0.9

Overall balance (commitment basis)

Including grants

-3.9

-9.6

-5.6

-5.5

-3.9

-3.2

-3.0

-3.0

-3.0

Excluding grants

-6.7

-13.6

-11.9

-9.5

-7.7

-6.9

-6.7

-6.4

-6.5

External current account

-8.5

-2.6

-0.8

-5.9

-4.7

-4.5

-4.3

-4.2

-4.0

Excluding official current transfers

-9.7

-5.7

-3.4

-8.0

-7.1

-6.9

-6.6

-6.2

-6.1

Stock of public and publicly guaranteed debt1

65.8

78.2

78.9

81.0

78.2

75.4

72.7

70.1

68.0

Of which: external debt

37.3

41.1

40.0

41.2

38.4

36.1

34.1

31.6

29.4

Memorandum items:

Nominal GDP at market prices (CFAF billions)

870.9

875.2

956.3

1061.1

1154.3

1245.9

1344.8

1451.6

1566.9

WAEMU gross official reserves (billions of US$)

17.5

21.8

24.5

...

...

...

...

...

...

(percent of broad money)

34.1

33.2

30.2

...

...

...

...

...

...

Sources: Guinea-Bissau authorities; and IMF staff estimates and projections.

1 Coverage expanded to include legacy arrears.