Guinea Bissau: IMF Executive Board Completes Fourth and Fifth Reviews Under the Extended Credit Facility for Guinea-Bissau and Approves U.S.$8.1 Million Disbursement


Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed today the fourth and fifth reviews under Guinea-Bissau's Extended Credit Facility (ECF) arrangement. The three-year ECF-supported program, approved on January 30, 2023, aims to reduce poverty, secure debt sustainability, improve governance, and reduce corruption, while creating fiscal space for inclusive growth. The completion of the fourth and fifth reviews enables the disbursement of SDR6.17 million (about US$8.1 million) to help meet the country's balance-of-payments and fiscal financing needs. This brings the total disbursement under the arrangement to SDR19.44 million (about US$ 25.7 million).

In completing the fourth and fifth reviews, the Executive Board granted waivers of non-observance for the missed performance criteria for end-September 2023 and end-December 2023. Furthermore, the Executive Board approved the request to modify program conditionality and the request to complete financing assurances review. The Executive Board also approved the authorities' request for rephasing of access and for creating an additional quarterly review for an April 2024 test date.

Economic growth was resilient in 2023 and reached 4.3 percent. Headline inflation averaged 7.2 percent and would have reached double digits without tax cuts on fuel and food, and rice price subsidies introduced in late 2023. The current account deficit reached 8.6 percent of GDP, reflecting a severe terms of trade shock. The overall fiscal deficit was 8.2 percent of GDP while public debt is estimated at 80.2 percent of GDP in 2023. Going forward, decisive actions are needed to maintain fiscal discipline and reduce public debt while accelerating governance and other structural reforms to support inclusive growth.

At the conclusion of the Executive Board's discussion, Mr. Li, Deputy Managing Director and Acting Chair, made the following statement:

"Notwithstanding a challenging economic and political context, including political instability, terms-of-trade shocks, soaring food inflation, and tightening regional financial conditions, Guinea-Bissau authorities' efforts to restore sound economic policies are commendable. Continued implementation of structural reforms and fiscal consolidation under the Fund-supported program would be crucial to ensure debt sustainability, strengthen financial stability, and generate fiscal space for development policies.

"Program performance in the combined fourth and fifth reviews was weaker than expected mainly due to policy slippages in late 2023 and delayed reform implementation under the previous government. However, the new government has demonstrated strong program commitment by taking concrete steps to address program deviations. All five prior actions were completed and measures were adopted to mobilize additional revenues, reduce unsustainable subsidies, and reinforce controls on non-priority expenditure and the wage bill.

"The successful implementation of the fiscal consolidation strategy is key to reduce vulnerabilities and bring down the high level of public debt. Mobilizing revenue is essential, particularly through the reduction of tax expenditures, improvements in tax administration and the broadening of the tax base. On the expenditure side, measures are necessary for controlling non-priority spending while safeguarding the most vulnerable population. Moreover, prudent public debt management and mobilization of grant support are vital to mitigate risks to debt sustainability.

"It is imperative to strengthen the implementation of structural reforms, including strengthening the anti-corruption framework, enhancing transparency, improving the rule of law, and addressing weaknesses in the financial sector. Moreover, the authorities should continue to take steps to strengthen the oversight of state-owned enterprises, including those in the energy sector, to mitigate fiscal risks.

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