Statement at the Conclusion of the IMF Mission to Guinea-BissauPress Release No. 11/97
March 23, 2011
An International Monetary Fund (IMF) mission led by Mr. Paulo Drummond visited Guinea-Bissau March 10–23, 2011. The mission reviewed Guinea-Bissau’s economic performance under the Extended Credit Facility (ECF) approved in May 2010 (see Press Release No. 10/185), assessed the impact of rising import prices for food and fuel, and agreed with the authorities on economic policies for the remainder of 2011.1 The mission met with President Malam Bacaí Sanhá, Prime Minister Carlos Gomes, Jr., Minister of Finance José Mario Vaz, Minister of Economy Helena Embaló, Minister of Labor and Public Administration Fernando Gomez, National Director of the Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO) João Fadía, and other government officials. The mission also held discussions with representatives of the private sector, civil society, the donor community, and other development partners.
At the conclusion of the visit, Mr. Drummond, the mission chief to Guinea-Bissau, issued the following statement:
“Guinea-Bissau made further progress in stabilizing its economy in 2010. Economic growth is estimated to have reached about 3.5 percent, supported by a rebound in the price of cashew exports and a pick-up in construction activity; inflation was subdued; and budgetary stability was sustained. Progress on structural reforms was maintained during the year, and by December, the country benefitted from more than US$1 billion in debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative.
“Performance under the ECF-supported program continues to be satisfactory. All performance criteria at end-December were observed, and all structural benchmarks for the second review were met. All quantitative targets for end-December were also met, including the one on social and priority spending. The fiscal performance reflects sustained economic activity and strong revenue collection, while domestic spending was kept below program targets to address shortfalls in budget support.
“Looking forward, the growth outlook is favorable, but inflation prospects have worsened. Real GDP is expected to accelerate moderately to 4.3 percent in 2011, driven by rising cashew production, higher cashew prices, and a continued rebuilding of infrastructure, especially roads, electricity, and water. Rising import prices for fuel and food are expected to drive inflation to about 4 percent in 2011, above the West African Economic and Monetary Union (WAEMU) convergence criterion. Core inflation, however, is expected to remain subdued, and headline inflation should come back within the WAEMU target range in 2012 once the one-off effect of rising import prices subsides.
“The mission is encouraged by the authorities’ determination to move ahead with economic reforms this year, building on the momentum generated by reaching the HIPC completion point last December. The government has approved a medium-term action plan for modernizing the public administration that builds on the census completed last year, and it has begun to make progress establishing a unified payroll and personnel management system.
“The fiscal situation however, is still fragile and it will be important for the government to consolidate gains achieved so far and further strengthen public finances in the period ahead. This includes sustaining efforts to mobilize more revenues, improve the quality of spending, and adjust to higher import prices of food and fuel products.
“The IMF's Executive Board is scheduled to consider the second review of Guinea-Bissau’s economic program under the ECF in May 2011, when the next disbursement of SDR 2.414 million (approximately US$3.6 million) becomes available. To reinforce our presence in Guinea-Bissau, the IMF is reopening its Resident Representative Office in Bissau beginning in June 2011.”
1 The ECF is a concessional IMF facility for low-income countries. ECF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in the country's Poverty Reduction Strategy Paper. ECF loans carry a zero interest rate until end-2011 and an annual interest rate of no more than 0.5 percent thereafter. The loans are repayable over 10 years with a 5½ -year grace period on principal payments.