IMF Concludes Staff Visit to Guinea-BissauPress Release No. 09/415
November 18, 2009
An International Monetary Fund (IMF) mission led by Mr. Paulo Drummond visited Guinea-Bissau during November 5–18 to assess the economic performance under the 2009 Emergency Post-Conflict Assistance (EPCA)-supported program, review the authorities’ fiscal plans for 2010, and discuss the possible path toward a medium- term arrangement. The mission met with the Prime Minister Carlos Domingos Gomes, the Minister of Finance José Mario Vaz, the Minister of Economy Helena Nosolini Embaló, and other senior members of the government, as well as representatives of the private sector, development partners, and civil society. At the conclusion of the visit, the mission issued the following statement:
“In 2009, Guinea-Bissau faced the challenge of adjusting to a less favorable external environment amid an unstable political context. Lower prices for the predominant export (cashews) and falling remittances led to a significant slowdown in incomes and exacerbated fiscal and balance of payment pressures. The impact of these factors on growth, however, was partly offset by a higher volume of exports stemming from a favorable cashew harvest, as well as a pick-up in construction activity. As a result, the IMF mission expects real GDP growth at just below 3 percent in 2009. Lower import prices have helped contain inflation. Looking ahead, the recovery in the global economy, expectations of a sustained cashew production, and improving terms of trade are expected to contribute to a moderate pick-up in growth to about 3.5 percent in 2010 and close to 4 percent thereafter. Continued political stabilization and improved security will be critical to the economic recovery.
“Fiscal performance in 2009 has been satisfactory. Tax revenue overperformed partly reflecting a stronger collection effort, and domestic spending was contained within program targets. However, the implementation of structural reforms has been slow and most targets for September were missed. In particular, a comprehensive action plan for public financial management (PFM) reform is now expected to be in place by end-December.
“The mission welcomes the draft budget for 2010, which is appropriately designed to achieve several important objectives: keep current-year spending within available resources, domestic and external, thereby avoiding new domestic arrears; increase tax revenues through the elimination of tax exemptions on certain products; start reducing the large stock of domestic arrears; protect priority spending; and incorporate resources for contingencies and reforms. The budget is consistent with a medium-term fiscal program that gradually raises revenues and reduces expenditures as a share of GDP. The mission also welcomes the preparation of a medium-term action plan to address domestic arrears.
“The mission held preliminary discussions on the authorities’ request for a medium-term program with the Fund for which negotiations are likely to start in early 2010.”