## 1gnbea2023004

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---

### Executive summary — context and program performance
- Socio-political stability maintained during transition: legislative election on June 4, 2023; new parliament constituted in July; new government formed on August 8, 2023.
- External shock: disappointing cashew nut exports and higher food prices created a severe terms-of-trade shock and significant food insecurity risks.
- Financing constraints from tightening of regional financial conditions.
- Authorities requested augmentation of access of 40 percent of quota (SDR 11.36 million), bringing total program access to 140 percent of quota (SDR 39.76 million).
- The ECF-supported program is catalyzing highly concessional financing, especially additional budget support.
- Program performance for June 2023:
  - Four out of eight Quantitative Performance Criteria (QPC) were missed.
  - Missed QPCs and related figures:
    - Floor on tax revenue missed by 0.4 percent of GDP (lower-than-expected cashew revenue).
    - Ceiling on the wage bill missed by 0.2 percent of GDP (lower-than-expected savings from the 2022 census of public workers).
    - Floor on domestic primary balance missed by 2.3 percent of GDP due to significant overrun of non-wage expenditure during the election period.
    - Ceiling on external arrears missed by CFAF 0.6 billion because of a late payment of external debt service (payment has been made).
  - June 2023 discretionary and related expenditures:
    - Transfer to the public utility company: CFAF 5.2 billion.
    - Surge in discretionary expenditure between April–July 2023: 3.1 percent of GDP (mainly unbudgeted presidential travel expenses and acquisition of security equipment).
- Structural benchmarks (SBs):
  - Two out of three SBs for June 2023 were met.
  - SB on a multiyear staffing plan proposed to be reprogrammed for March 2024.
  - Continuous SB on external debt service not met between July–September 2023.
  - Continuous SB on the Technical Committee of Arbitration of Budgetary Expenditure (COTADO) not met between July–August 2023; COTADO resumed activities in September with revised procedures.

### Recent economic developments and outlook
- Growth and inflation:
  - Growth projected to moderate to 4.2 percent in 2023 from 4.5 percent projected at the second review.
  - Average inflation expected to be 8.0 percent in 2023, driven by food inflation and surge in international rice prices (India’s partial ban on rice exports in July 2023).
- External sector adjustments:
  - Export projections lowered by 3.0 percent of GDP in 2023 and 2024 due to decline in international cashew prices and lower export volumes.
  - Current account deficit (excluding official transfers) will widen by 1.9 percent and 1.4 percent of GDP in 2023 and 2024 respectively (from the second review).
  - Residual financing needs estimated at 0.4 percent and 1.3 percent of GDP in 2023 and 2024; expected to be met by the requested augmentation and additional budget support.
- Banking sector (2022):
  - Gross NPLs to total loans declined from 19.4 percent in 2021 to 10.4 percent in 2022.
  - Banking sector held 12 percent of its total assets in central and local government debt and 2 percent exposure to SOEs in 2022.
  - Financial vulnerabilities from sovereign debt and exchange rate exposures in the banking sector remain low.
- Medium-term outlook and risks:
  - Growth expected to accelerate to about 5 percent supported by normalization of cashew exports, greater donor engagement, and governance reforms.
  - Inflation expected to converge to about 2 percent.
  - Current account deficit expected to improve gradually due to fiscal consolidation and more favorable terms of trade.
  - Downside risks (selected):
    - Continued terms-of-trade shock from cashew and food prices.
    - Further tightening of regional financial conditions.
    - Adverse weather conditions.
    - Political instability constraining fiscal consolidation.
    - Materialization of contingent liabilities in SOEs and banking system adding fiscal costs.
  - DSA contingent liabilities included: 3.2 percent of GDP for SOEs, 2 percent of GDP for the undercapitalized bank, and 5 percent of GDP for financial markets.
  - Recommended response if risks materialize: further rationalize expenditures and seek additional donor support, especially additional budget support from IFIs.

### Fiscal policy stance, corrective actions, and revenue measures
- Fiscal trajectory and recent measures:
  - Compared to the second review, the domestic primary deficit for December 2023 is expected to widen by 1.9 percent of GDP but remains on track with the consolidation path.
  - Measures since August 2023 include strict rationalization of non-priority expenditure; monthly discretionary expenditure curtailed to less than one-fifth of the level between March and July 2023.
  - Measures should reduce the deficit by 0.9 percent of GDP in less than six months.
  - Up-front adjustments improve the domestic primary deficit by 1.1 percent of GDP from 2022.
  - Continuing strict no new hiring policy and other measures are expected to meet the QPC for December 2023.
- Draft 2024 budget and outlook:
  - Updated projections include a domestic primary balance of -0.4 percent of GDP for 2024, a deterioration of 0.8 percent of GDP from the second review, reflecting:
    - Settlement of Karpower invoices and costs of early termination of the power purchase contract: 0.5 percent of GDP.
    - Presidential election costs scheduled in late 2024 and limited interventions in the social protection sector: 0.3 percent of GDP.
  - Revenue mobilization, wage bill control, and rationalization of non-priority expenditure are expected to improve the domestic primary balance by 1.8 percent of GDP with respect to 2023.
  - Medium-term projection: overall deficit and public debt projected to be reduced below 3 percent and 70 percent of GDP by 2025 and 2026, respectively, in line with WAEMU criteria.
- Revenue measures and DGCI reforms (MEFP ¶9):
  - DGCI professionalization: tax revenue (excluding cashew-related taxes) outperformed target by CFAF 1.3 billion until June.
  - Introduce quantitative performance evaluation for DGCI managers; underperformers reallocated and replaced via public tender.
  - Reactivate tax audit program: audit 25 large taxpayers selected on a risk basis in the next 12 months (focus on divergence of IGV at customs vs. tax returns).
  - 5G license sale slightly postponed; license fees to be included in the 2024 budget.

### Expenditure controls, PFM, and Treasury management
- Expenditure controls and COTADO:
  - COTADO institutionalized with ex-post scrutiny by the Prime Minister and registration of commitment approvals in the system to block non-approved spending.
  - Since September 2023 discretionary expenditure is strictly controlled through COTADO.
  - Publication commitments: reclassify “other current expenditure” and publish a report to explain major spending items and overruns until July 2023.
- Wage bill and payroll controls:
  - Wage bill declined 25 percent y/y in September 2023 and expected to continue; strict no new hiring policy maintained.
  - New census of public workers to eliminate ghost workers and generate wage bill savings; validation by line ministries and rollout of biometric devices after pilot at MoEF.
  - IMF-supported blockchain project to complete pilot phase at MoEF and MoPA in December 2023 and be rolled out to other ministries in 2024.
- Treasury Single Account (TSA) and cash management:
  - Authorities will freeze, investigate, and close bank accounts of line ministries that have negative balances.
  - Government bank account census completed in April 2023; bank accounts with negative balances have been frozen.
  - MoEF will pay all budgetary expenditure, particularly wages, from the TSA (SB, end-June 2024).
  - Revise cash forecasting methodologies and processes (SB, end-June 2025).

### Energy sector, EAGB, and mitigation of SOE fiscal risks
- EAGB performance and meter rollout:
  - In five months, EAGB installed 32,700 pre-paid meters, increasing monthly revenue from CFAF 1.5 to 1.9 billion.
  - EAGB has purchased 40,000 additional prepaid meters, which will cover most residential clients with pre-paid meters.
  - After completing installation of 35,000 pre-paid meters (SB, end-December 2023), an additional 40,000 will be installed to cover the vast majority of residential clients by end-2024.
- Transition to diversified power sources:
  - OMVG project (hydropower from Guinea-Conakry) is nearly complete and will substantially reduce power purchase costs.
  - Transitional period required before switching from Karpower to OMVG because the AfDB-financed “Ring Line” Project is yet to be completed; construction delayed for five years with partial works having deficiencies.
  - Government to speed up construction, fix deficiencies, and continue renegotiating with Karpower with World Bank support.
- Recent disruption and payments:
  - In October 2023, Karpower cut power for two days to demand payment of six months of invoices totaling USD 14.2 million.
  - To recover power supply, the government and EAGB paid USD 10.0 million of invoices through a government transfer (US 3.9 million) and EAGB’s short-term borrowing (US 6.1 million).
  - Remaining invoices (USD 4.2 million) will be paid from a concessional project loan in 2024.
  - Because the transfer was included in the 2023 budget and borrowing was within existing government guarantees, the intervention created no additional fiscal costs for 2023.
- Accountability and audits:
  - Audit Court auditing the power purchase contract and addendums; audit results to be published by December 2023.
  - Government will pursue accountability for irregularities in the addendum process after terminating Karpower supply if warranted.

### Debt assessment, financing, and augmentation request
- Debt profile and projections:
  - Guinea-Bissau is at a high risk of debt distress, but debt remains assessed as sustainable (MEFP ¶20-24).
  - Stock of public and publicly guaranteed debt projected to decline to 76.5 percent of GDP in 2023.
  - With proposed policies, total public debt projected to decline to 65.7 percent of GDP by 2028.
- Domestic and external arrears:
  - Authorities plan to clear all audited and recognized domestic arrears during the program period and are making progress in settling legacy external arrears.
  - Implementation of a ministerial order prioritizing debt service payments (continuous SB) will ensure external debt services are paid before the due date.
- Program financing and augmentation:
  - Authorities requested augmentation of access of 40 percent of quota to meet larger BoP needs; augmentation would be phased by adding disbursements of 13.3 percent of quota to each of the next three reviews.
  - Program is fully financed with firm commitments for the next 12 months, including additional budget support (CFAF 11.0 billion) and taking into account the requested augmentation.
  - Fund’s share in cumulative financing needs would decrease from 61 percent to 53 percent after the augmentation.
  - With the proposed higher access, outstanding obligations to the Fund would peak in 2025 at 3.4 percent of GDP; debt service to the Fund would peak at 2.8 percent of revenues (excluding grants) or 3.0 percent of exports in 2030.
  - Three out of six capacity-to-repay indicators exceed the 75th percentile of past UCT-quality PRGT arrangements, particularly in the long-term; capacity to repay remains subject to significant downside risks but is considered manageable given policy commitments and reforms.

### Financial sector restructuring and banking
- Bank recapitalization/disengagement:
  - Government approved an offer from a strategic investor to buy the government stake and recapitalize a large undercapitalized bank to meet regulatory standards.
  - Due diligence completed and investor interest reaffirmed to the new government; final terms agreed and to be submitted to the Regional Banking Commission after shareholders’ approval.
  - If the transaction does not materialize, government will request an assessment of the bank’s financial position and a full independent audit of the loan portfolio (including NPLs) and prepare a viable plan to recapitalize, resolve, or liquidate the bank by the end of the program based on IMF recommendations.
- Banking sector metrics:
  - Gross NPLs fell from 19.4 percent in 2021 to 10.4 percent in 2022.
  - Banking sector exposures: 12 percent in central and local government debt and 2 percent exposure to SOEs in 2022.

### Governance, rule of law, AML/CFT, and judicial sector
- Transparency and audits:
  - Audit Court to publish the audit report of the High Commissioner for COVID-19 as a prior action and progressing audits of COVID-19 related transactions of other entities.
  - DGCP publishes beneficial ownership information of all crisis-related contracts and is expanding disclosure to all public contracts through participation in COTADO.
- AML/CFT and asset declaration:
  - With Fund technical assistance, authorities will enhance AML/CFT effectiveness in accordance with the revised action plan based on the 2023 WAEMU AML/CFT Law.
  - New law on asset declaration regime pending in Parliament; implementation requires capacity development of the Supreme Court of Justice as depository.
- Justice sector infrastructure:
  - Lack of infrastructure threatens the justice sector; several regional courts and justice services have been closed due to inability to pay rent or personnel.
  - 2024 budget will prioritize construction of minimum infrastructure to maintain judicial sector operations.
- Staff recommendations:
  - Construct minimum infrastructure for the judicial sector.
  - Continue strengthening audits, procurement transparency, and AML/CFT effectiveness.

### Risks — Annex I (selected items and mitigation)
- External risks (relative likelihood / expected impact if realized / time horizon):
  - Intensification of regional conflicts: High / High / ST. Mitigation: create fiscal space via wage bill control, prioritize targeted spending, mobilize additional grants and concessional loans.
  - Abrupt global slowdown or recession: Medium / High / ST. Mitigation: reprioritize public spending, mobilize concessional financing.
  - Monetary policy miscalibration: Medium / High / ST. Mitigation: adjust fiscal policy to anchor expectations, target spending to vulnerable.
  - Commodity price volatility and further adverse cashew nut price movements: Medium / Medium–ST, MT. Mitigation: control public expenses, step up diversification.
  - Cyberthreats: High / High / ST. Mitigation: create contingency plans, assess digital risk exposure.
- Domestic risks (selected):
  - Social discontent and political risks: High / High / ST, MT. Mitigation: prioritize targeted social spending, create fiscal space.
  - Systemic financial instability: Medium / High / MT. Mitigation: enhance bank supervision, improve debt collection.
  - Continued weaknesses in SOEs (notably EAGB): Medium / Medium. Mitigation: implement credible SOE management strategy, improve governance and accountability.
  - Extreme climate events: Medium / High / ST, MT. Mitigation: diversify economy, invest in climate-resilient infrastructure.

### Program modalities, conditionality, staff appraisal, and Board actions
- Conditionality and monitoring:
  - Authorities requested waiver for non-observance of missed QPCs for June 2023 on the basis of corrective actions.
  - Proposed revision to the QPC on domestic primary balance for December 2023 to accommodate overruns and delay in 5G licensing.
  - Two prior actions and eight new structural benchmarks proposed; three SBs to be reprogrammed and two SBs to be replaced with modified SBs for legal consistency.
  - IMF monitoring: quarterly through December 2023 and semi-annual thereafter, with bi-annual performance criteria (end-June and end-December) and continuous criteria as specified in the TMU.
- Staff views and recommendations:
  - Staff welcomes authorities’ commitment, supports augmentation request and completion of the third review on the basis of corrective actions that maintain strong fiscal consolidation.
  - Staff recommends accelerating reforms on revenue mobilization, expenditure controls, fiscal risk mitigation, and improving expenditure efficiency given limited fiscal space.
  - If downside risks materialize, authorities should further rationalize expenditures and seek additional donor support, especially additional budget support from IFIs.
- Staff supports authorities’ requests (waivers, modification of QPC, completion of third review and associated disbursement) conditional on:
  - adequate safeguards for further use of Fund’s resources, and
  - that Guinea-Bissau’s adjustment efforts have not been undermined by developments in debtor-creditor relations.

*Source: IMF staff report excerpts and annexes, 1gnbea2023004*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- Socio-political stability maintained during transition to an opposition-led new government; legislative election on June 4, 2023, new parliament constituted in July, new government formed on August 8, 2023.
- Adverse external shock from disappointing cashew nut exports and higher food prices creating a severe terms-of-trade shock and significant food insecurity risks for vulnerable populations.
- Financing constrained by tightening of regional financial conditions.
- Authorities requested augmentation of access of 40 percent of quota (SDR 11.36 million), bringing total program access to 140 percent of quota (SDR 39.76 million).
- The ECF-supported program is catalyzing highly concessional financing, especially additional budget support.

### Program performance
- Four out of eight Quantitative Performance Criteria (QPC) were missed for June 2023.
- Missed QPCs and related figures:
  - Floor on tax revenue missed by 0.4 percent of GDP (lower-than-expected cashew revenue).
  - Ceiling on the wage bill missed by 0.2 percent of GDP (lower-than-expected savings from the 2022 census of public workers).
  - Floor on domestic primary balance missed by 2.3 percent of GDP due to significant overrun of non-wage expenditure during the election period.
  - Ceiling on external arrears missed by CFAF 0.6 billion because of a late payment of external debt service (payment has been made).
- Components of the June 2023 discretionary and related expenditures:
  - Transfer to the public utility company: CFAF 5.2 billion.
  - Surge in discretionary expenditure between April–July 2023: 3.1 percent of GDP (mainly unbudgeted presidential travel expenses and acquisition of security equipment).
- Structural benchmarks (SBs):
  - Two out of three SBs for June 2023 have been met.
  - A SB on a multiyear staffing plan proposed to be reprogrammed for March 2024.
  - Continuous SB on external debt service not met between July–September 2023.
  - Continuous SB on the Technical Committee of Arbitration of Budgetary Expenditure (COTADO) not met between July–August 2023; COTADO resumed activities in September with revised procedures.

### Recent economic developments
- Growth and inflation projections for 2023:
  - Growth projected to moderate to 4.2 percent in 2023 from 4.5 percent projected at the second review (negative impact of declining cashew income on consumption; partial compensation from subsistence farming and higher private investments).
  - Average inflation expected to be 8.0 percent in 2023, driven by food inflation and a surge in international rice prices (India’s partial ban on rice exports in July 2023).
- External sector adjustments:
  - Export projections lowered by 3.0 percent of GDP in 2023 and 2024 due to decline in international cashew prices and lower export volumes.
  - Current account deficit (excluding official transfers) will widen by 1.9 percent and 1.4 percent of GDP in 2023 and 2024 respectively (from the second review).
  - Residual financing needs estimated at 0.4 percent and 1.3 percent of GDP in 2023 and 2024; expected to be met by the requested augmentation and additional budget support.
- Banking sector (2022):
  - Gross NPLs to total loans declined from 19.4 percent in 2021 to 10.4 percent in 2022 (mainly due to settlement of cross-arrears by the government with debtors of the undercapitalized bank).
  - Banking sector held 12 percent of its total assets in central and local government debt and 2 percent exposure to SOEs in 2022.
  - Financial vulnerabilities from sovereign debt and exchange rate exposures in the banking sector remain low.

### Outlook and risks
- Medium-term outlook:
  - Growth expected to accelerate to about 5 percent supported by normalization of cashew exports, greater donor engagement, and governance reforms.
  - Inflation expected to converge to about 2 percent.
  - Current account deficit expected to improve gradually due to fiscal consolidation and more favorable terms of trade.
- Downside risks (Annex I highlights):
  - Continued terms-of-trade shock from cashew and food prices.
  - Further tightening of regional financial conditions.
  - Adverse weather conditions.
  - Political instability risks constraining fiscal consolidation.
  - Materialization of contingent liabilities in SOEs and banking system adding fiscal costs.
  - DSA contingent liabilities included: 3.2 percent of GDP for SOEs, 2 percent of GDP for the undercapitalized bank, and 5 percent of GDP for financial markets.
- Recommended response if risks materialize: further rationalize expenditures and seek additional donor support, especially additional budget support from IFIs.

### Policy discussions — Macroeconomic policies
Fiscal policy stance and consolidation path
- Domestic primary deficit and fiscal trajectory:
  - Compared to the second review, the domestic primary deficit for December 2023 is expected to widen by 1.9 percent of GDP but remains on track with the consolidation path.
  - Measures since August 2023 include strict rationalization of non-priority expenditure; monthly discretionary expenditure curtailed to less than one-fifth of the level between March and July 2023.
  - Measures should reduce the deficit by 0.9 percent of GDP in less than six months (Text Figure 3).
  - Up-front adjustments improve the domestic primary deficit by 1.1 percent of GDP from 2022.
  - Continuing strict no new hiring policy and other measures are expected to meet the QPC for December 2023.
- Draft 2024 budget and outlook:
  - Updated projections include a domestic primary balance of -0.4 percent of GDP for 2024, a deterioration of 0.8 percent of GDP from the second review, reflecting:
    - Settlement of Karpower invoices and costs of early termination of the power purchase contract: 0.5 percent of GDP.
    - Presidential election costs scheduled in late 2024 and limited interventions in the social protection sector: 0.3 percent of GDP.
  - Nevertheless, revenue mobilization, wage bill control, and rationalization of non-priority expenditure are expected to improve the domestic primary balance by 1.8 percent of GDP with respect to 2023.
  - In the medium term, the overall deficit and public debt are projected to be reduced below 3 percent and 70 percent of GDP by 2025 and 2026, respectively, in line with WAEMU criteria.

Corrective actions and reform measures (MEFP references)
- Revenue mobilization (MEFP ¶9):
  - DGCI professionalization: tax revenue (excluding cashew-related taxes) outperformed target by CFAF 1.3 billion until June.
  - Introduce quantitative performance evaluation for DGCI managers; underperformers reallocated and replaced via public tender.
  - Reactivate tax audit program: audit 25 large taxpayers selected on a risk basis in the next 12 months (focus on divergence of IGV at customs vs. tax returns).
  - 5G license sale slightly postponed; license fees to be included in the 2024 budget.
- Expenditure controls (MEFP ¶10-11):
  - COTADO institutionalized with ex-post scrutiny by the Prime Minister and registration of commitment approvals in the system to block non-approved spending.
  - Wage bill declined 25 percent y/y in September 2023 and expected to continue; strict no new hiring policy maintained.
  - New census of public workers to eliminate ghost workers and generate wage bill savings, with improved validation by line ministries and rollout of biometric devices after pilot at MoEF.
  - IMF-supported blockchain project to complete pilot phase at MoEF and MoPA in December 2023 and be rolled out to other ministries in 2024.

### Staff views and recommendations
- Staff welcomes authorities’ strong commitment to program objectives and supports the requests for augmentation of access and completion of the third review on the basis of corrective actions that maintain a strong fiscal consolidation path.
- Staff recommends accelerating reforms on revenue mobilization, expenditure controls, fiscal risk mitigation, and improving expenditure efficiency given limited fiscal space.
- If downside risks materialize, authorities should further rationalize expenditures and seek additional donor support, especially additional budget support from IFIs.

*Source: EXECUTIVE SUMMARY, 1gnbea2023004*

### 14.      Enhancing expenditure efficiency is essential to supporting economic diversification

### 14.      Enhancing expenditure efficiency is essential to supporting economic diversification

### Expenditure efficiency and public service delivery
- The wage bill consumes about 80 percent of budget allocations to the priority sectors (Annex II), constraining non-wage spending and service delivery.
- The 2024 budget should safeguard resources for key projects and activities in the priority sectors.
- Policy actions and changes:
  - Replace the temporary food price subsidy introduced in the 2023 budget (0.2 percent of GDP) with a more sustainable agricultural support program in 2024.
  - For 2024, the government is introducing a program of agricultural input support based on existing innovative projects supported by development partners including the World Food Program (Annex III).
- Staff recommendation: Protect non-wage spending in priority sectors, continue streamlining the wage bill (including addressing ghost workers), and expand agricultural input support tailored to local contexts.

### Fiscal structural reforms and treasury management
- Transparency measures:
  - Authorities will publish a report reclassifying “other current expenditure” to explain major spending items and ensure transparency over spending overruns until July 2023.
- Treasury Single Account implementation:
  - Authorities will freeze, investigate, and close bank accounts of line ministries that have negative balances.
- Corrective actions tied to program conditionality (QPCs and SBs):
  - Corrective actions include DGCI professionalization with quantitative performance evaluation and tax audits; institutionalizing the COTADO; and implementing a strict no new hiring policy.
  - The QPCs on tax revenue and wage bill for December 2023 are expected to be met with these measures.

### Fiscal risks from the public utility company (EAGB) and energy transition
- Rapid prepaid meter rollout:
  - In five months, EAGB installed 32,700 pre-paid meters, increasing monthly revenue from CFAF 1.5 to 1.9 billion.
  - EAGB has purchased 40,000 additional prepaid meters, which will cover most residential clients with pre-paid meters.
- Transition to diversified power sources:
  - The OMVG project (hydropower from Guinea-Conakry) is nearly complete and will substantially reduce power purchase costs.
  - A transitional period is required before switching from Karpower to OMVG because the AfDB-financed “Ring Line” Project (transmission line connecting the OMVG terminal and distribution grid) is yet to be completed; construction has been delayed for five years and partial works have deficiencies raising quality and safety concerns.
  - Authorities are taking measures to speed up construction and fix deficiencies; government will continue renegotiating with Karpower with World Bank support.
- Accountability and audits:
  - The Audit Court is auditing the power purchase contract and addendums; audit results will be published by December 2023.
  - Government will pursue accountability for irregularities in the addendum process after terminating Karpower supply if warranted.
- Recent disruption and payments:
  - In October 2023, Karpower cut power for two days to demand payment of six months of invoices totaling USD 14.2 million (late 2022 and early 2023).
  - To recover power supply, the government and EAGB paid USD 10.0 million of invoices through a government transfer (US 3.9 million) and EAGB’s short-term borrowing (US 6.1 million).
  - Remaining invoices (USD 4.2 million) will be paid from a concessional project loan in 2024.
  - Because the transfer was included in the 2023 budget and borrowing was within existing government guarantees, the intervention created no additional fiscal costs for 2023.

### Financing and debt outlook
- Debt assessment and projections:
  - Guinea-Bissau is at a high risk of debt distress, but debt remains assessed as sustainable (MEFP ¶20-24).
  - The stock of public and publicly guaranteed debt is projected to decline to 76.5 percent of GDP in 2023.
  - Debt sustainability reflects authorities’ commitment to sound policies and strong donor engagement; compliance with a QPC of the zero ceiling on new non-concessional borrowing is consistent with the authorities’ external borrowing plan.
- Domestic and external arrears and management:
  - Authorities plan to clear all audited and recognized domestic arrears during the program period and are making progress in settling legacy external arrears.
  - Implementation of a ministerial order prioritizing debt service payments (continuous SB) will ensure external debt services are paid before the due date.
- Risks and vulnerabilities:
  - Debt outlook remains vulnerable to a weaker economic recovery, further tightening of financial conditions, and failure to adhere to prudent fiscal policies.
- Program financing and augmentation request:
  - Authorities requested an augmentation of access of 40 percent of quota to meet larger BoP needs from a severe terms of trade shock; the augmentation would be phased by adding disbursements of 13.3 percent of quota to each of the next three reviews.
  - The program is fully financed with firm commitments for the next 12 months, including additional budget support (CFAF 11.0 billion) and taking into account the requested augmentation.
  - Fund’s share in cumulative financing needs would decrease from 61 percent to 53 percent after the augmentation.
  - With the proposed higher access, outstanding obligations to the Fund would peak in 2025 at 3.4 percent of GDP; debt service to the Fund would peak at 2.8 percent of revenues (excluding grants) or 3.0 percent of exports in 2030.
  - Three out of six capacity-to-repay indicators exceed the 75th percentile of past UCT-quality PRGT arrangements, particularly in the long-term; capacity to repay remains subject to significant downside risks but is considered manageable given policy commitments and reforms.

### Financial sector restructuring
- Bank disengagement and recapitalization:
  - Government approved an offer from a strategic investor to buy the government stake and recapitalize a large undercapitalized bank to meet regulatory standards.
  - Due diligence completed and investor interest reaffirmed to the new government; final terms agreed and to be submitted to the Regional Banking Commission after shareholders’ approval.
  - If the transaction does not materialize, the government will request an assessment of the bank’s financial position and a full independent audit of the loan portfolio (including NPLs) and prepare a viable plan to recapitalize, resolve, or liquidate the bank by the end of the program based on IMF recommendations.

### Governance, rule of law, and anti-corruption
- External audits and procurement transparency:
  - Audit Court will publish the audit report of the High Commissioner for COVID-19 as a prior action and is progressing audits of COVID-19 related transactions of other entities.
  - Directorate-General of Public Tenders (DGCP) publishes beneficial ownership information of all crisis-related contracts and is expanding disclosure to all public contracts through participation in the COTADO.
- AML/CFT and asset declaration regime:
  - With Fund technical assistance, authorities will enhance AML/CFT effectiveness in accordance with the revised action plan based on the 2023 WAEMU AML/CFT Law (Annex IV).
  - New law on asset declaration regime pending in Parliament; implementation requires capacity development of the Supreme Court of Justice (responsible for the depository).
- Justice sector infrastructure and anti-corruption operations:
  - Lack of infrastructure threatens the justice sector; several regional courts and justice services have been closed due to inability to pay rent or personnel.
  - Anti-corruption operations of the Judiciary Police in the regions have been incapacitated without regional bases.
  - The 2024 budget will prioritize construction of minimum infrastructure to maintain judicial sector operations.
- Staff recommendations:
  - Construct minimum infrastructure to address dire situation of the judicial sector.
  - Continue strengthening audits, procurement transparency, and AML/CFT effectiveness.

### Program modalities, conditionality, and staff appraisal
- Program adjustments and conditionality:
  - Authorities requested a waiver for non-observance of missed QPCs for June 2023 on the basis of corrective actions described above.
  - A proposed revision to the QPC on a domestic primary balance for December 2023 accommodates overruns and impact of delay in 5G licensing.
  - Two prior actions and eight new structural benchmarks are proposed; three SBs to be reprogrammed and two SBs to be replaced with modified SBs for legal consistency.
- Staff appraisal highlights:
  - Guinea-Bissau faces an adverse external shock from the fall in international cashew prices, widening the current account deficit and creating larger near-term BoP needs.
  - Program performance was weaker than expected for June 2023 due to significant spending overruns during the election period; corrective actions have been taken to rationalize non-priority expenditure and mobilize additional revenue.
  - Revenue mobilization is critical; staff welcomes DGCI professionalization measures including quantitative performance indicators and reactivation of tax audits.
  - New corrective actions will strengthen expenditure controls: a public worker census will underpin the wage bill target; since September 2023 discretionary expenditure is strictly controlled through the COTADO, to be institutionalized and digitalized.
  - Transitioning to diversified power sources is critical for EAGB’s financial viability; staff urges prompt completion and remediation of the Ring Line and continued renegotiation with Karpower including costs of early contract termination.
  - Governance reforms show strong implementation; staff welcomes the Audit Court’s progress and the development of the asset declaration regime, while recommending a revised national AML/CFT strategy and remedial action on judicial infrastructure.
  - Staff reiterates that efficiency in social and priority spending should be improved, non-wage spending protected, the costly 2023 food price subsidy should not be continued, and agricultural input support expanded and locally adapted.

*Source: 14. Enhancing expenditure efficiency is essential to supporting economic diversification (IMF staff document).*

### 36.       Based on the strong policy commitments and prevailing BoP needs, staff supports the

### 1gnbea2023004 - 36.       Based on the strong policy commitments and prevailing BoP needs, staff supports the

### Staff recommendations and program decisions
- Staff supports the authorities’ request for augmentation of access.
- Given corrective actions, staff supports the authorities’ requests for waivers for non-observance of the end-June 2023 performance criteria on tax revenue, wage bill, domestic primary balance, and external arrears.
- Staff supports the request to modify the end-December 2023 performance criterion on a domestic primary balance.
- Staff supports completion of the third review, the authorities’ request for the associated disbursement, and completion of the financing assurance review on the basis that:
  - adequate safeguards remain in place for the further use of the Fund’s resources in Guinea Bissau’s circumstances, and
  - Guinea Bissau’s adjustment efforts have not been undermined by developments in debtor-creditor relations.

### Capacity to repay and Fund exposure indicators
- Text Figure 4 presents Capacity to Repay (CtR) indicators compared to UCT arrangements and PRGT countries (in percent of the indicated variable). Notes explain:
  - 1) T = date of arrangement approval. PPG = public and publicly guaranteed.
  - 2) Red lines/bars indicate the CtR indicator for the arrangement of interest.
  - 3) The median, interquartile range, and comparator bars reflect all UCT arrangements (including blends) approved for PRGT countries between 2012 and 2022.
  - 4) PRGT countries in the control group with multiple arrangements are entered as separate events in the database.
  - 5) Comparator series is for PRGT arrangements only and runs up to T+10.
  - 6) Debt service obligations to the Fund reflect prospective payments, including for the current year.
  - 7) In the case of blenders, the red lines/bars refer to PRGT+GRA. In the case of RST, the red lines/bars refer to PRGT+GRA+RST.
- Panel indicators (as labeled) include:
  - Percent of Gross International Reserves (TT+1 through T+10 shown on axis).
  - Percent of GDP (TT+1 through T+10 shown on axis).
  - Percent of PPG External Debt (TT+1 through T+10 shown on axis).
  - Percent of Revenue Excl. Grants (TT+1 through T+10 shown on axis).
  - Percent of Exports of Goods and Services (TT+1 through T+10 shown on axis).
  - Percent of PPG External Debt Service (TT+1 through T+10 shown on axis).
- C. Largest Peaks charts list country-event labels (examples from the dataset): GMB2012, SLE2013, KEN2021, GMB2021, LBR2012, TGO2020, MDG2016, BFA2013, KEN2016, GEO2012, MWI2018, RWA2016, GNB PRGT, BEN2017, GIN2012, GIN2017, CIV2016, UGA2021, ETH2019, MDG2021, STP2019, BDI2012, CMR2021, CAF2016, SEN2021, SLE2017, TGO2017, SLE2018, LBR2019, SEN2022, MWI2012, COD2021, CAF2012, MLI2019, CAF2019, TCD2021, TCD2017, BFA2018.

### Macroeconomic outlook, growth and living standards
- Growth and living standards summary (Figure 1):
  - Growth in 2023 is estimated to moderate because of lower cashew exports affected by delays in exports of inventories.
  - Inflation increased due to higher fuel and food prices; however better weather conditions supported domestic agriculture production and food security.
  - Weak health conditions are evidenced by a significantly lower life expectancy at birth, compared to SSA peers, contributing to economic fragility and weighing on living standards.
- Cashew export series in Table 2a memorandum items:
  - Cashew export quantity (thousands of tons): 155, 234, 183, 181, 220, 229, 233, 238, 244 (for 2020–2028 series as listed).
  - Cashew export prices (US$ per ton): 1,000, 1,154, 1,200, 1,050, 1,200, 1,224, 1,242, 1,273, 1,299.

### Global developments and external environment
- Figure 2 highlights:
  - Central banks in advanced economies are tightening monetary policy.
  - Yields in the regional market are starting to increase.
  - Growth of trading partners is falling.
  - Cashew prices are falling but rice prices are rising.
  - The euro and CFA have depreciated substantially against the US dollar, with no rebound expected.
  - Terms of trade are expected to continue deteriorating.
- Commodity and price indicators shown include:
  - Commodity Prices (year-over-year change, percent) for Oil, Broken Rice, Groundnuts, Cashew.
  - Exchange Rates (Dec 2019 = 100) series for Euro, Dollar index (DXY).
  - Export and Import Prices (Annual growth, in percent): Terms of Trade, Export prices, Import prices.
  - Monetary Policy Rates (Percent): Federal Reserve, European Central Bank, WAEMU.

### Fiscal, external and monetary developments
- Figure 3 summary:
  - Fiscal balances improved since 2020 due to stronger tax revenues and lower expenditures, though financing is constrained by tightening of regional financial conditions.
  - Increased regional financing partially crowded out bank credit to the private sector.
  - The widened current account deficit is financed only partially by portfolio investment (treasury securities).
- Table highlights (selected figures from Table 2a: Balance of Payments, CFAF billions):
  - Current Account Balance (2020–2028 series as listed): -22.4, -7.8, -102.3, -105.8, -64.6, -67.4, -66.5, -68.5, -70.1.
  - Exports, f.o.b (2020–2028): 123.1, 166.3, 142.5, 121.4, 165.6, 175.3, 181.5, 190.7, 200.4.
  - Of which: cashew nuts (2020–2028 partial series): 109.2, 154.4, 136.5, 114.7, 158., 3167.4, 173.0, 181.5, 190.6 (as printed).
  - Imports, f.o.b. (2020–2028): -176.8, -194.0, -243.1, -242.8, -255.0, -260.8, -267.4, -281.4, -292.2.
  - Current transfers (net) (2020–2028): 82.2, 84.4, 82.0, 96.6, 108.3, 103.7, 106.5, 112.4, 115.3.
  - Official transfers (2020–2028): 27.8, 24.9, 20.0, 32.3, 41.2, 31.8, 30.4, 33.4, 35.2.
  - Financial account (2020–2028): 0.8, -21.7, -34.2, -82.4, -37.2, -39.2, -50.5, -54.6, -63.5.
  - Treasury bills (regional financing) (2020–2028): -46.2, -59.3, -58.1, -57.8, -40.5, -35.5, -45.9, -49.1, -50.8.
  - Overall balance (2020–2028): -20.3, 51.0, -50.4, -6.2, -9.0, -8.6, 5.2, 9.3, 18.2.

### Fiscal operations, budget and financing (central government)
- Table 3a (CFAF billions) selected lines for 2024–2028:
  - Revenue and grants (2024–2028): 134.7, 182.5, 163.0, 190.0, 197.5, 194.9, 222.8, 231.3, 249.8, 274.9, 297.0 (as printed across budget columns).
  - Tax revenue (2024–2028): 67.8, 93.5, 99.7, 113.7, 113.7, 114.2, 126.0, 142.9, 158.3, 175.1, 190.7.
  - Grants (2024–2028): 35.0, 60.1, 36.4, 43.9, 46.4, 48., 58.4, 50.2, 50.2, 55.2, 58.6.
  - Expenditure (2024–2028): 219.1, 238.7, 227.8, 233.4, 239.7, 262.1, 268.1, 273.7, 295.3, 323.1, 348.8.
  - Wages and salaries (2024–2028): 57.0, 58.2, 66.3, 59.0, 59.0, 59.0, 61.0, 65.3, 70.0, 75.6, 79.9.
  - Net acquisition of nonfinancial assets (2024–2028): 75.7, 90.3, 67.6, 87.6, 84.9, 79.5, 93.1, 101.4, 109.4, 121.6, 133.5.
  - Overall balance, including grants (commitment) (2024–2028): -84.3, -56.1, -64.8, -43.4, -42.2, -67.2, -45.3, -42.4, -45.5, -48.2, -51.8.
  - Domestic primary balance (commitment) memorandum (2024–2028): -40.3, -17.8, -34.2, -2.9, -2.9, -25.5, -4.8, 9.7, 9.9, 13.1, 14.6.

### Monetary and financial indicators
- Table 6 (Indicators of Capacity to Repay the Fund, 2023–35) selected series:
  - Fund obligations based on existing credit Principal (SDR millions, 2023–2035): 1.47, 4.12, 3.41, 4.26, 4.66, 3.62, 4.26, 4.26, 2.84, 1.42, 0.95, 0.00, 0.00 (as printed).
  - Total obligations based on existing and prospective credit (SDR millions): 1.47, 4.12, 3.41, 4.26, 4.66, 3.62, 6.73, 9.38, 9.37, 7.95, 7.48, 4.07, 1.42.
  - Total obligations (CFAF billions): 1.193.3, 12.753.4, 43.782.9, 65.507.6, 66.506.1, 23.331.16 (values as printed across columns).
  - Percent of government revenue (selected years): 0.8, 12.0, 11.5, 21.7, 21.7, 21.2, 62.7, 82.5, 82.0, 31.7, 8.9, 10.29.
  - Outstanding Fund credit (SDR millions) (2023–2035 series): 39.96, 52.88, 58.92, 54.66, 50.00, 46.39, 39.66, 30.29, 20.91, 12.96, 5.48, 1.42, 0.00.
  - Net use of Fund credit (2023–2035): 11.77, 12.96, 6.08, -4.26, -4.66, -3.62, -6.73, -9.38, -9.37, -7.95, -7.48, -4.07, -1.42.
  - Nominal GDP (memorandum, as printed): 1,194.4, 1,292.9, 1,395.6, 1,506.4, 1,626.0, 1,746.8, 1,861.9, 1,984.6, 2,115.4, 2,254.8, 2,391.9, 2,537.3, 2,691.6.

### Public debt profile and debt service
- Table 7 (Public Debt Holder Profile, 2022–24) selected highlights:
  - Total debt (2022, US$ million): 1,387.0 (100.0 percent of total debt; 80.4 percent of GDP).
  - External debt (2022): 676.4 (48.8 percent of total debt; 39.2 percent of GDP).
  - Multilateral creditors (2022): 541.8 (39.1 percent of total debt; 31.4 percent of GDP).
    - IMF (2022): 40.5 (2.9 percent of total debt; 2.3 percent of GDP).
    - World Bank (2022): 190.6 (13.7 percent of total debt; 11.0 percent of GDP).
    - BOAD (2022): 205.6 (14.8 percent of total debt; 11.9 percent of GDP).
  - Bilateral creditors (2022): 134.6 (9.7 percent of total debt; 7.8 percent of GDP).
  - Domestic debt (2022): 710.5 (51.2 percent of total debt; 41.2 percent of GDP).
  - Regional T-bills (2022): 405.8 (29.3 percent of total debt; 23.5 percent of GDP).
  - Payment Arrears (2022): 19.7 (1.4 percent of total debt; 1.1 percent of GDP).
  - Contingent liabilities / Public guarantees (2022): 32.2 (2.3 percent of total debt; 1.9 percent of GDP).
  - Nominal GDP (memo): 1,717.8 (units as printed).

### Program financing phasing and disbursement schedule under the ECF arrangement (2023–25)
- Table 8: Current phasing and proposed schedule of disbursements under the ECF Arrangement, 2023–25 (in millions of SDR and percent of Quota)
  - January 30, 2023: 2.37 SDR, 8.3 percent of Quota — Executive Board approval of the three-year ECF arrangement.
  - April 17, 2023: 2.37 SDR, 8.3 percent of Quota — Observance of the performance criteria for January 31, 2023 and completion of the first review.
  - July 17, 2023: 2.37 SDR, 8.3 percent of Quota — Observance of the performance criteria for March 31, 2023 and completion of the second review.
  - October 17, 2023: 2.37 SDR, 8.3 percent of Quota (current phasing) / 6.16 SDR, 21.7 percent of Quota (proposed) — Observance of the performance criteria for June 30, 2023 and completion of the third review.
  - January 17, 2024: 2.37 SDR, 8.3 percent of Quota (current) / 6.16 SDR, 21.7 percent of Quota (proposed) — Observance of performance criteria for September 30, 2023 and completion of the fourth review.
  - April 17, 2024: 2.37 SDR, 8.3 percent of Quota (current) / 6.15 SDR, 21.7 percent of Quota (proposed) — Observance of performance criteria for December 31, 2023 and completion of the fifth review.
  - October 17, 2024: 4.73 SDR, 16.7 percent of Quota — Observance of performance criteria for June 30, 2024 and completion of the sixth review.
  - April 17, 2025: 4.73 SDR, 16.7 percent of Quota — Observance of performance criteria for December 31, 2024 and completion of the seventh review.
  - October 17, 2025: 4.72 SDR, 16.7 percent of Quota — Observance of performance criteria for June 30, 2025 and completion of the eighth review.
  - Total Disbursements: 28.40 SDR, 100.0 percent of Quota (current phasing) and 39.76 SDR, 140.0 percent of Quota (proposed).

*Source: IMF staff estimates and projections as presented in the provided content.*

### Annex I. Risk Assessment Matrix

### Annex I. Risk Assessment Matrix

### External Risks
- Intensification of regional conflicts.
  - Relative Likelihood: High
  - Expected Impact If Realized / Time Horizon: High / ST
  - Expected impacts described:
    - Escalation of Russia’s war in Ukraine or other regional conflicts and resulting economic sanctions disrupt trade (e.g., energy, food, tourism, and/or critical supply chain components), remittances, refugee flows, FDI and financial flows, and payment systems.
    - Deepening geo-economic fragmentation: broader and deeper conflicts and weakened international cooperation lead to a more rapid reconfiguration of trade and FDI, supply disruptions, technological and payments systems fragmentation, rising input costs, financial instability, a fracturing of international monetary and financial systems, and lower potential growth.
    - The economy would be hit hard by disruptions in the supply chain and business in general.
    - Increase in inflation, food insecurity and poverty.
    - Additional pressure on public expenditure and tax exemptions, which jeopardize fiscal consolidation strategy and sustainability.
    - Balance of payments imbalances generated by the worsening conditions of the current or financial accounts.
  - Policies to Mitigate Risks:
    - Create fiscal space through wage bill control, spending review and revenue mobilization for new policies to mitigate supply shocks in the economy.
    - Prioritize and target public spending towards the most vulnerable people.
    - Review and reprioritize tax exemptions for programs with higher economic and social impact.
    - Mobilize additional grants and concessional loans from development partners to cover more persistent external needs.

- Abrupt global slowdown or recession.
  - Relative Likelihood: Medium
  - Expected Impact If Realized / Time Horizon: High / ST
  - Expected impacts described:
    - Global and idiosyncratic risk factors combine to cause a synchronized sharp growth downturn, with recessions in some countries, adverse spillovers through trade and financial channels, and markets fragmentation.
    - Europe: intensifying fallout from the war in Ukraine, worsening energy crisis and supply disruptions, and monetary tightening exacerbate economic downturns and housing market corrections.
    - China: greater-than-expected economic disruptions from COVID resurgence, rising geopolitical tensions, and/or a sharper-than-expected slowdown in the property sector disrupt economic activity.
    - EMDEs: a new bout of global financial tightening, possibly combined with volatile commodity prices, leads to spiking risk premia, debt distress, widening of external imbalances, fiscal pressures, and sudden stops.
    - Volatility in cashew nut prices and demand.
    - Balance of payments imbalances generated by the worsening conditions of the current or financial accounts.
    - Higher debt financing costs.
    - Reduced fiscal space and need for additional fiscal consolidation efforts.
  - Policies to Mitigate Risks:
    - Review and reprioritize public spending towards programs with higher economic and social impact.
    - Create fiscal space to tackle financial vulnerabilities.
    - Mobilize additional grants and concessional loans from development partners to cover more persistent external needs.

- Monetary policy miscalibration.
  - Relative Likelihood: Medium
  - Expected Impact If Realized / Time Horizon: High / ST
  - Expected impacts described:
    - Amid high economic uncertainty and volatility, major central banks slow monetary policy tightening or pivot to loosen monetary policy stance prematurely, de-anchoring inflation expectations and triggering a wage-price spiral in tight labor markets.
    - Increase in inflation, food insecurity and poverty.
    - Social unrest.
    - Financial and monetary aggregates volatility.
  - Policies to Mitigate Risks:
    - Adjust fiscal policy to anchor expectations of economic agents.
    - Prioritize and target public spending towards the most vulnerable people.
    - Monitor macro-financial risks.

- Commodity price volatility.
  - Relative Likelihood: Medium
  - Expected Impact If Realized / Time Horizon: Medium
  - Expected impacts described:
    - A succession of supply disruptions (e.g., due to conflicts and export restrictions) and demand fluctuations (e.g., reflecting China reopening) causes recurrent commodity price volatility, external and fiscal pressures, and social and economic instability.
    - Deterioration of fiscal position.
    - Increase in inflation, food insecurity and poverty.
    - Social unrest.
    - Delayed fiscal adjustment and structural reforms.
  - Policies to Mitigate Risks:
    - Create fiscal space through wage bill control, spending review and tax mobilization.
    - Prioritize and target public spending towards the most vulnerable people.
    - Encourage diversification of the economy.

- Further adverse cashew nut price movements.
  - Relative Likelihood: Medium
  - Expected Impact If Realized / Time Horizon: Medium / ST, MT
  - Expected impacts described:
    - A weaker than projected price recovery of the dominant export product would hamper economic recovery.
    - Private sector incomes come under pressure, denting economic activity.
    - Government revenues further diminish, leaving less room for priority spending.
    - Balance of payments problems generated by the worsening of the current account.
  - Policies to Mitigate Risks:
    - Control public expenses to compensate for lower revenues.
    - Step up diversification efforts.

- Cyberthreats.
  - Relative Likelihood: High
  - Expected Impact If Realized / Time Horizon: High / ST
  - Expected impacts described:
    - Cyberattacks on critical domestic and/or international physical or digital infrastructure (including digital currency and crypto ecosystems) trigger financial and economic instability.
    - Impact on public services that rely on digital infrastructure.
  - Policies to Mitigate Risks:
    - Create contingent plans for cyberattacks.
    - Assess the risk and impact of cyberattacks on public services.

Notes on risk classification included in the RAM:
- “low” is meant to indicate a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent.
- The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities.
- Non-mutually exclusive risks may interact and materialize jointly.
- The conjunctural shocks and scenario highlight risks that may materialize over a shorter horizon (between 12 to 18 months) given the current baseline.
- Structural risks are those that are likely to remain salient over a longer horizon.

### Domestic Risks
- Social discontent and political risks.
  - Relative Likelihood: High
  - Expected Impact If Realized / Time Horizon: High / ST, MT
  - Expected impacts described:
    - Supply shocks, high inflation, real wage drops, and spillovers from crises in other countries worsen inequality, trigger social unrest and political tensions, and give rise to financing pressures and damaging populist policies. This exacerbates imbalances and slows growth.
    - Delayed fiscal adjustment.
    - Political instability.
    - Limited financing inflows and investment projects delays.
    - Supply disruptions and weaker confidence.
  - Policies to Mitigate Risks:
    - Prioritize and target public spending towards the most vulnerable people.
    - Create fiscal space through wage bill control, spending review and tax mobilization.
    - Mobilize additional grants and concessional loans from development partners to cover more persistent external needs.

- Systemic financial instability.
  - Relative Likelihood: Medium
  - Expected Impact If Realized / Time Horizon: High / MT
  - Expected impacts described:
    - Sharp swings in real interest rates, risk premia, and assets repricing amid economic slowdowns and policy shifts trigger insolvencies in countries with weak banks, causing markets dislocations.
    - Domestic banking instability may also arise from high NPLs, and bank’s undercapitalization.
    - Limited credit extension hampers investment and growth.
    - Potential contingent liabilities adding to fiscal pressures.
  - Policies to Mitigate Risks:
    - Enhance banking supervision and enforce prudential regulations.
    - Improve processes and procedures for collection of debts and collateral.
    - Create fiscal space to absorb financial shocks.

- Continued weaknesses in state-owned enterprises.
  - Relative Likelihood: Medium
  - Expected Impact If Realized / Time Horizon: Medium
  - Expected impacts described:
    - The public electricity and water utility (EAGB), in particular, has been a long-standing problem.
    - Limited and expensive electricity and water supply.
    - Potential contingent liabilities adding to fiscal pressures.
  - Policies to Mitigate Risks:
    - Implement credible strategy to improve management of public enterprises.
    - Improve governance, transparency and accountability.

- Extreme climate events.
  - Relative Likelihood: Medium
  - Expected Impact If Realized / Time Horizon: High / ST, MT
  - Expected impacts described:
    - Extreme climate events cause more severe than expected damage to infrastructure (especially in smaller vulnerable economies) and loss of human lives and livelihoods, amplifying supply chain disruptions and inflationary pressures, causing water and food shortages, and reducing growth.
    - Harm cashew production worsening the livelihood of people in rural areas and exacerbating extreme poverty and inequalities.
    - Higher recovery spending, higher financing costs, and lower revenues.
    - Supply disruptions and weaker confidence.
  - Policies to Mitigate Risks:
    - Diversify the economy.
    - Address infrastructure gaps and income/developmental disparities among regions, while instituting appropriate social safety nets.
    - Promote investment in climate resilient infrastructure.

*Source: Annex I. Risk Assessment Matrix, GUINEA-BISSAU, INTERNATIONAL MONETARY FUND.*

### Annex III. Table 1. Guinea-Bissau: Productivity

### Annex III. Table 1. Guinea-Bissau: Productivity

### Productivity comparison of rice farms (Average of Six Sites in Guinea-Bissau)
- Seeds: Traditional 60 kg/ha; SRI 6 kg/ha
- Yield: Traditional 2,000 kg/ha; SRI 3,740 kg/ha
- Yield/seeds: Traditional 33 kg/kg; SRI 623 kg/kg
- Conclusion from source text: "the SRI method drastically reduces use of seeds while doubles yield, improving productivity of seed inputs by 19-fold (Annex III Table 1);"
- Source attribution in table: World Food Program, staff calculations.

### Budgetary support, INPA operations, and cost-effectiveness
- Recent budget practice: "Guinea-Bissau’s budget allocates little domestic resources to agricultural input support."
- INPA financing: "In recent years, the INPA has not received any financing from the budget, except for wages."
- Cultivation status: "only 7 ha out of 141 ha of the INPA’s main rice farms in Contuboel, central Guinea-Bissau have been cultivated and the rest abandoned."
- Proposed small-scale expansion: "only a small amount of resources (CFAF 24 million) is needed to expand the experimental farms by 30 ha, which can generate seeds enough to produce foods for 2,400 people,"
- Comparative fiscal cost: "direct subsidies of the same quantity of foods would have much higher fiscal costs (CFAF 100 million)."
- Policy implication: "Expanding the experimental farms and securing resources for their operations are necessary to create a program for agricultural input support that can be sustained after donors leave the space."

### Comparison of agricultural input support projects and quality concerns
- Annex III. Table 2 (excerpted figures):
  - New Project: Seeds 133 kg/ha; Input costs CFAF 0.5 million/ha
  - SRI/INPA: Seeds 6 kg/ha (SRI); Input costs CFAF 0.8 million/ha (INPA)
- Concern noted in text:
  - The proposed externally financed project would provide "excessive quantity of inputs" per hectare while costing "much less than inputs that the INPA is using (Annex III, Table 2)."
  - This suggests the project may "provide the excessive volume of low-quality inputs, which are likely to be unusable or damaging for agricultural production, while wasting very limited fiscal space."
- Recommendation from source text: "The government should undertake rigorous due diligence to weed out costly and ineffective project proposals."

*Source: Annex III. Table 1 and related text, 1gnbea2023004 - Annex III. Table 1. Guinea-Bissau: Productivity*

### 5.      In the medium-term, growth is expected to increase to around 5 percent, while an

### 5.      In the medium-term, growth is expected to increase to around 5 percent, while an

### Medium-term outlook
- Growth is expected to increase to around 5 percent.
- The external balance is expected to improve gradually.
- Medium-term growth drivers:
  - Robust fiscal policy allocating more resources to pro-growth expenditure.
  - Ambitious governance reforms to improve business environment, mobilize additional financing, and boost private and public investments.
  - Normalization of cashew export and better terms of trade will gradually reduce the current account deficit in the medium-term, although the current account deficit will remain large in 2024.

### Program performance (June 2023)
- Quantitative performance criteria (QPC):
  - Met 4 out of 8 QPCs for June 2023.
  - Missed floor on tax revenue by CFAF 4.3 billion due to lower-than-expected cashew related revenue.
  - Missed ceiling on the wage bill by CFAF 1.9 billion because of lower-than-expected savings from the 2022 census of public workers.
  - Missed floor on a domestic primary balance by CFAF 28.0 billion due to significant overrun of non-wage expenditure (including one-off transfer to the public utility company CFAF 5.2 billion and election related costs CFAF 2.2 billion, and surge of discretionary spending such as presidential travel expenses and purchases of security equipment).
  - Missed ceiling on external arrears by CFAF 0.6 billion because of a late payment of external debt service (payment has already been made).
  - Corrective measures: issuing a ministerial order to prioritize external debt service; government implementing corrective actions described in ¶9-11.
- Structural benchmarks (SB):
  - Met 2 out of 3 SBs for June 2023.
  - Request to postpone approval of the medium-term staffing plan until March 2024 to align with the 2024 budget.
  - Since the second review: met two SBs for September and December 2023 and completed another SB for September 2023 with slight delay.
  - Did not meet a continuous SB on external debt service for September 2023.
  - COTADO (Technical Committee of Arbitration of Budgetary Expenditure) resumed activities in September 2023 and has been meeting regularly since then.

### Fiscal policy and reforms — supporting fiscal consolidation
- 2023 fiscal stance and adjustments:
  - Domestic primary deficit for 2023 will widen because of emergency interventions to offset food prices and the overrun until July that cannot be fully compensated by corrective actions.
  - 2023 budget to be approved by Parliament in November (prior action).
  - Target for the domestic primary deficit widened to CFAF 25.5 billion.
  - Government provided CFAF 1.8 billion price subsidy for 26,000 tonnes of rice (equivalent to about three months of rice imports).
  - Delayed completion of the 5G licensing sale round until 2024 limits compensatory revenue.
  - Continued tightening of wage bill via strict no new hiring policy and new census of public workers to keep the wage bill ceiling unchanged.
  - Draft 2024 budget will be submitted to Parliament prepared in line with program parameters (SB, end of December 2023).

- Revenue mobilization reforms (actions and SBs):
  - Professionalization of the Directorate-General of Duties and Taxes (DGCI):
    - Tax collection outperformed target by CFAF 1.3 billion through June, excluding cashew-related taxes.
    - Managers to be evaluated based on performance indicators and quantitative targets (SB, end of June 2024).
    - Appointments to service commissions via internal competition per Decree-Law No. 8/2012, of October 19.
    - Redeployment plan to be prepared by the Minister of Finance to reallocate unqualified managers outside DGCI (SB, reprogrammed to end-December 2024).
    - Streamlined policy for incentive payments to introduce performance-based incentives in 2024.
  - Improvements to taxpayer compliance:
    - Undertake tax audits of 25 large taxpayers (selected on a risk basis) focusing on IGV divergences during 12 months from October 2023 (SB, end-September 2024).
    - Targeting compliance of 149 large taxpayers.
  - Implementation of the new VAT Law:
    - Ratified ministerial order on the revenue reform action plan.
    - Secure funding for taxpayers’ VAT training as a short-term priority.
  - Streamlining of tax exemptions:
    - Revised law on the general exemption regime submitted to Parliament.
    - A cement company accounted for around a half of total tax exemptions granted to private sector beneficiaries for imported goods in recent years.
    - Cabinet report to assess compliance of the cement company’s exemptions with WAEMU regional legislation, considering WAEMU Commission’s decision regarding Senegal.
  - Mobilization of 5G license fees:
    - Collection likely delayed until mid-2024 when the National Regulatory Authority (NRA) is expected to establish the license fee schedule.
  - Other reforms:
    - Request Parliament to include approval of the new Customs Code in the agenda.
    - Submit revised income tax and stamp duties bills to Parliament (SB, end-June 2025).
    - Prepare an action plan to improve the fiscal regime for natural resource management (SB, end-June 2024).

- Wage bill controls:
  - Strict total freezing of new hiring and capping of salaries to achieve QPC for December 2023.
  - Reduction of streamlined advisor positions by 51 people in 2022.
  - Appeal process of the 2022 census reinstated about 1,500 workers.
  - New census of public workers in Ministries of Education, Health, Interior, Justice, and Economy and Finance to be completed in March 2024.
  - Joint order of MoEF and MoPA setting terms of reference for the census (SB, end-December 2023).
  - New census results to be validated by each line ministry and signed by each line minister.
  - Biometric control system connected to payroll installed at MoEF; pilot requires all MoEF employees to record attendance. Rollout to four other ministries contingent on pilot results.
  - IMF-supported blockchain project to complete pilot phase at MoEF and MoPA in December 2023 and be rolled out to other ministries in 2024.
  - Ultimate objective: develop integrated human resource management system.

- Non-wage expenditure controls and transparency (corrective actions):
  - Institutionalization of COTADO:
    - COTADO resumed activities in September 2023 and minimized discretionary spending.
    - Prime Minister’s order to: (i) require COTADO’s decisions to be monitored and endorsed by the Prime Minister permanently; (ii) submit quarterly report of expenditure approved by COTADO to the Prime Minister; (iii) prohibit payments of all non-wage expenditure unless approved by COTADO and registered by the DGO in the SIGFIP (SB, end-March 2024).
    - Implementation: ensure all commitments of discretionary expenditure are approved by COTADO and scrutinized by the Prime Minister on an ex-post basis (continuous SB, replacing existing continuous SB).
  - Publication of the Other Common Expenditure Report and State General Accounts:
    - Publish report including (i) economic and administrative classifications of all “other common expenditure”; and (ii) explanations of largest expenditures made for force majeure, sovereign, and similar purposes (SB, end-March 2024).
    - Prepare and send State General Accounts for 2022 and 2023 to the National Assembly and the Audit Court, including detailed information on other common expenses.
  - Reintroduction of systemic commitment controls:
    - Require MoEF approval of public contracts for all purchases of four key food items (rice, cooking oil, meat, and fish) and fuel (SB, end-March 2024).
    - Subsequently expand requirement to purchases of medicines and laboratory materials.

### Social protection and agricultural programs
- Vulnerable households:
  - Most vulnerable households are subsistence farmers in rural areas, comprising around 60 percent of total population.
- 2024 budget programs for agricultural diversification and social protection:
  - Agricultural input subsidy program through experimental farms:
    - Expand INPA experimental farms by 30 ha.
    - Expanded farms could provide seeds for food crops to feed more than 2,000 people for a year at costs four times less than providing food directly.
  - School feeding from domestic agricultural products:
    - With WFP support, implement a school feeding project that provides agricultural input and training to smallholder farmers and purchases their products for school feeding.
    - Objectives: improve agricultural productivity, farmers’ income, access to education, and children’s health.
  - Program for monitoring cashew producer prices:
    - Law fixed producer price at CFAF 375 per kg, but it fell to CFAF 215 per kg on average in 2023 due to intermediaries creating a fire-sale environment amid export delays.
    - Develop mechanism to monitor and publish cashew producer prices in different localities for the campaign in 2024.

- Social and priority spending protection:
  - Over the medium-term, priority social spending is projected to increase by 0.6 percentage points of GDP compared to the average of pre-Covid-19 period (reflected in the program floor on social and priority spending).
  - Public investment management:
    - Creation of an Excel-based medium-term Public Investment Project (PIP) database and centralization of quantitative information in Fichas de Projeto (SB, end-December 2023).
    - Online system for monthly reporting of externally financed capital expenditure piloted in 30 top projects per ministerial order.

### Mitigating fiscal risks — Electricidade e Aguas da Guinea-Bissau (EAGB) and power sector
- EAGB revenue and arrears:
  - Government provided CFAF 5.2 billion of transfers to EAGB in April, May, and October 2023 to clear invoices and restore power.
  - Karpower cut power supply for two days in October 2023 due to accumulated unpaid invoices.
  - Agreement with Karpower to pay remaining invoices from a concessional project loan.
  - Installation of 32,700 pre-paid meters in five months increased EAGB’s monthly revenue from CFAF 1.5 billion to CFAF 1.9 billion (close to target CFAF 2.0 billion).
  - EAGB has been current in payments to Karpower since April 2023.
  - After completing installation of 35,000 pre-paid meters (SB, end-December 2023), an additional 40,000 pre-paid meters will be installed to cover the vast majority of residential clients by end-2024.
  - For large clients where pre-paid meters cannot be installed, actions will be taken to collect tariffs arrears.

- Transition to diversified power sources:
  - OMVG project to connect Bissau to a hydropower plant in Guinea-Conakry is nearly completed: 196 km out of 218 km of transmission lines constructed to date.
  - Hydropower plant has capacity to cover Bissau year-round; termination of Karpower supply expected when OMVG electricity arrives, but a transitional period will be needed.
  - During transition, EAGB will pay OMVG’s capital costs of around CFAF 0.3 billion per month, which can be met from additional revenue from pre-paid meters.
  - Minister of Economy and Finance to approve EAGB’s transition plan specifying technical, financial, and legal actions before terminating Karpower supply in mid-2024 (approval by end of 2023).
  - Strategic plan for EAGB financial viability in medium to long-term to be prepared (SB, reprogrammed to end-December 2024).

- Ring Line Project and infrastructure concerns:
  - Ring Line Project building a circular transmission line around Bissau remains far from completion; transmission line between Antula substation (OMVG terminal) and Central substation is essential and not yet completed.
  - Quality and security concerns on the partially completed line.
  - Government to submit and publish report to Prime Minister that (i) calibrates negative economic and financial impact of delay in the Ring Line Project; (ii) presents testing and inspection results of the Antula-Central line; and (iii) specifies remedial works contractor should undertake (SB, end-March 2024).
  - Plan to connect to Bor thermal powerplant as backup and expand distribution grid outside central Bissau.
  - EAGB to strengthen day-to-day oversight of contractors to complete entire Ring Line by end-2024.

- Audit and management improvements:
  - Audit of the 2020 addendums to the Karpower contract:
    - Addendums increase capacity from 30MW to 70MW until end 2025, beyond current and future needs.
    - Audit Court to complete and publish an audit report of EAGB’s power purchase agreement and its addendums (SB, end-December 2023).
  - EAGB management:
    - After expiration of contract with Portuguese consortium in June 2023, new management selected with World Bank support.
    - World Bank also supporting revamp of EAGB operations and overall electricity sector performance.

### Improving treasury management
- Treasury Single Account (TSA) and cash management actions:
  - Government bank account census completed in April 2023; bank accounts of line ministries with negative balances have been frozen.
  - General Finance Inspectorate to inspect these accounts to clarify responsibilities for overdrafts; accounts will be closed and balances repaid.
  - MoEF will pay all budgetary expenditure, particularly wages, from the TSA (SB, end-June 2024).
  - Revise cash forecasting methodologies and processes (SB, end-June 2025).
  - Strengthen coordination with ministries that collect non-tax revenue.
  - Publish list of rates, scales and tariffs of all fees and charges collected by ministries and government agencies including the Judiciary and registers (SB, end-December 2023, replacing the existing SB).

*Source: 1gnbea2023004*

### 20.      The government will mitigate debt vulnerabilities through a sustained fiscal

### 20.      The government will mitigate debt vulnerabilities through a sustained fiscal

### Debt vulnerabilities and fiscal consolidation
- In 2022, total public debt is estimated to be 80.4 percent of GDP and external public debt is estimated to be 39.2 percent of GDP.
- The share of credits from the Fund, World Bank, and African Development Bank in total external public debt is estimated at 42 percent in 2022.
- The share of all multilateral creditors in total external public debt is 80 percent in 2022.
- Past reliance on non-concessional borrowing from the BOAD, the largest holder of external public debt, will be reduced significantly during the program.
- Through commitments to the fiscal consolidation path and a zero ceiling on new non-concessional borrowing (except for the BOAD Development and Cohesion Fund), total public debt and external debt will decline to:
  - 65.7 percent of GDP (total public debt) by 2028.
  - 25.9 percent of GDP (external debt) by 2028.

### Domestic arrears clearance
- The government plans to start clearing the remaining stock of domestic arrears accumulated between 1974 and 1999 amounting to CFAF 12.2 billion in the coming years.
- With external technical support, the government intends to:
  - Determine the true amount of any outstanding domestic arrears through further auditing.
  - Verify full tax compliance of all creditors.
  - Determine net government arrears after correcting for any tax obligations.
- These steps will allow the government to decide on a strategy towards clearing all outstanding domestic arrears over the medium term.

### Legacy external arrears
- Agreements or settlements have been reached with Libya, Taiwan Province of China, Angola, and Russia.
- Negotiations with Brazil are pending final approval from the Brazilian authorities.
- Since November 2021, requests have been sent to Pakistan to attempt resolving remaining external arrears.
- The government is committed to solving all legacy external arrears and avoiding further accumulation.

### Debt management and transparency
- Improvements underway:
  - Implementing a ministerial order that clearly attributes roles and responsibilities in debt service payment operations.
  - Publishing annual reports on debt (both external and domestic) covering debt service, disbursements, and agreements.
  - Continued reporting to international debt statistics databases.
- Implementation issues:
  - During the transition to the new MoEF management after the election, there was a gap in implementation of the ministerial order.
  - The government will strictly implement the ministerial order to prevent recurrence of delay in external debt services.
- Planned enhancements:
  - Expand coverage of the published annual debt bulletin to cover debt from the two largest SOEs that pose the largest fiscal risks (EAGB and the civil aviation authority).
  - Publish quarterly debt bulletins that include central government debt and guarantees.
- Note: BOAD recently changed the terms of this facility to make it fully concessional for Guinea Bissau.

### Borrowing policy
- The government will contract external debt only on highly concessional terms.
- Commitment: not to contract non-concessional external loans.
- The government will consult with the IMF on evaluation of the financial terms of new proposed loans.

### Governance and rule of law reforms
- Public procurement:
  - Reforms during the pandemic included publication of beneficial ownership and other key information of all crisis-related contracts on the websites of the General Directorate for Public Tenders (DGCP) and the High Commission for COVID-19.
  - Decree on beneficial ownership of bidders of public procurement approved in April 2022; next focus is implementation expanding publication of beneficial ownership information to all public contracts on the DGCP website.
  - Issuance of implementing guidelines and training sessions for suppliers and procurement officers in ministries.
  - Enforce DGCP’s prior authorization of public procurement and contracts for discretionary expenditure through DGCP’s participation of the COTADO.
- External audits:
  - Independent third-party auditor completed an audit of all COVID-19 related spending between June 2020 and December 2021 with support of the Inspector-General of Finance; audit report published on the website.
  - Government published an audit response letter committing to implement auditor recommendations.
  - The Audit Court has completed an external audit of the High Commissioner for COVID-19 and will publish the audit report (Prior Action).
  - The Audit Court is undertaking an external audit of all COVID-19 related spending using results of the independent third-party audit as technical inputs.
  - Ministry of Finance requested an audit of the irregular hiring process in 2021-22; Audit Court will plan to complete in 2023.
- AML/CFT reforms:
  - In the February 2022 Mutual Evaluation Report (MER), GIABA gave Guinea-Bissau low effectiveness ratings in all 11 criteria.
  - Milestones and timelines:
    - Operationalize the Inter-Ministerial Committee presided by the Minister of Finance coordinating MER and NRA implementation and the national AML/CFT policy by November 2023.
    - Council of Ministers to approve and submit to Parliament the 2023 uniform law relating to AML/CFT in WAEMU Member States by end-December 2023.
    - Conduct a national risk assessment (NRA) that incorporates recommendations from the 2022 MER by end March 2024.
    - Publish the national AML/CFT policy and action plan addressing risks identified in the NRA and MER key findings by June 2024.
    - Prepare legal framework and action plan designating the CENTIF as AML/CFT supervisor for DNFBPs starting with high-risk sectors and in line with the 2023 AML/CFT WAEMU law by December 2024.
    - Require all legal persons registering at the Centre for Formalization of Enterprises (CFE) and at the Directorate General of Civil Identification, Registry and Notary (DGICRN) to submit a beneficial ownership identification form by June 2024.
  - The government will resource the CENTIF accordingly and seek Fund technical assistance to complete some milestones.
- Anti-corruption framework:
  - Resubmitted to Parliament a law reforming the asset declaration regime with broader coverage and strengthened enforcement; law will assign depository responsibilities to the Supreme Justice Court.
  - All members of the new government have made asset declarations under existing law; declarations deposited with the Secretary-General of Government and will be transferred to a new depository once the new law is approved.
  - The Supreme Justice Court will establish a unit responsible for implementing the new law as the depository in 2024; operations of this unit will be funded from the 2024 budget.
  - The unit will issue guidelines for submission and publication of asset declarations, including formats, by end-2024.
  - Starting in 2024, establish decentralized units of the Judicial Police (which currently has no base outside Bissau).
  - In 2024, submit legislation to strengthen independence of Supreme Court Judges and Prosecutor-General through improved nomination process and develop legal framework for asset recovery and cooperation in economic crime investigations.
  - In 2025, update a national anti-corruption strategy based on diagnosis of corruption risks to prioritize reforms and inform medium-term resource planning.
- Judicial sector support:
  - Several regional courts have closed due to lack of rent payments or magistrates.
  - Urgent plan to construct three Houses of Justice accommodating regional courts, Identity Services, and other justice-related services by the end 2024; potential roll-out to other towns in the medium-term if effective.
- Access to justice and property rights:
  - Establish Center for Access to Justice (CAJ); construct CAJ buildings in Bubaque and Catio by the end 2024.
  - Develop a CAJ website including a database of fundamental legislation and information for legal literacy and awareness (SB, end-March 2024); services provided free of charge.
  - Prepare a medium-term action plan to improve cadaster coverage and digitalization of property registers.
  - Prepare the strategic plan to ensure financial sustainability of the CFE by December 2023 to support digitalization of the companies’ register.

### State property management
- Identified weaknesses: many government houses occupied without rental payments ("casas avaliadas sem pagamento") and government vehicles unused or disposed for private use.
- Actions and timelines:
  - March 2023: government approved decree to transpose the WAEMU Directive on State Property Management.
  - Issue implementing regulations replacing outdated colonial-period legislation by June 2024.
  - Ministry of Public Works and National Secretariat of State Property (SNPE) to inspect all casas avaliadas sem pagamento to assess conditions, evaluate market values, and compare with register valuations (SB, end-December 2023).
  - By end-2023, Inspector-General of Finance and SNPE to inspect major ministries to identify unused or misused government vehicles; recovered vehicles will be reallocated by the MoEF.
  - Exploring technological solutions to track movement of government vehicles and detect misuse.

### Financial sector reforms
- Preserve financial sector stability and implement a disengagement strategy for a large, undercapitalized bank.
- Actions taken:
  - Council of ministers approved an offer of a strategic investor to buy the government stake and recapitalize the institution to comply with regulatory standards.
  - Due diligence process completed; investor reiterated interest to the new government.
  - Final terms agreed and to be submitted to the Regional Banking Commission after approval at the bank’s Shareholders Meeting.
- Contingency if sale does not materialize:
  - Government committed to a new SB to request an assessment of the bank’s financial position and a full independent audit of the loan portfolio including NPLs from a third-party auditing firm.
  - Prepare a report on a viable plan to ensure the bank is either recapitalized or resolved or liquidated by the end of the program based on IMF recommendations.

### Statistics reforms
- National accounts:
  - Publish national accounts for 2019 and 2020 by December 2023.
  - Establish a committee between INE, MoEF (Directorate-General of Forecasts and Economic Study), and BCEAO to validate national accounts data before publication.
  - Approved a decree to enhance INE’s organizational structure and resources.
  - Begin increasing INE human resources in 2024, particularly in the national accounts directorate which currently has only two staff.
- Data dissemination:
  - Implement the Enhanced General Data Dissemination System (e-GDDS) to publish key macroeconomic and financial data in a timely manner and enhance interagency coordination.

### Risks and contingencies
- Downside risks to the program include:
  - Growth and inflation setbacks from domestic political risks and weak state capacity.
  - Disappointing cashew nut exports.
  - Materialization of climate and health hazards.
  - Tighter financial conditions in the regional market.
  - Geopolitical tensions impacting food and oil prices and donor support.
- Additional risks:
  - Further tightening of regional financial conditions and worsening debt risks could constrain access to financing.
  - Fiscal risks in SOEs and the undercapitalized bank could generate contingent liabilities.
- Government readiness:
  - Stand ready to adjust policies in close consultation with IMF staff to ensure program objectives.
  - Potential policy responses include further rationalization of non-priority expenditures and requests for additional support from development partners.

### Program design, financing, and monitoring
- Coordination and oversight:
  - Program monitoring and coordination will be through the MoEF, which will consult with other public institutions and provide oversight to ensure public spending complies with budget limits.
- IMF monitoring:
  - Program monitored by the IMF Executive Board on a quarterly basis until December 2023 and thereafter on a semi-annual basis using bi-annual performance criteria (end-June and end-December) and continuous performance criteria.
  - Definitions and reporting requirements for performance criteria and indicative targets are in the Technical Memorandum of Understanding (TMU).
- Government commitments under the program (as presented in the TMU):
  - Refrain from entering or guaranteeing new external borrowing contracts at non-concessional rates, except for disbursements from the Development and Cohesion Fund of the West African Development Bank (TMU ¶8).
  - Adhere to the quantitative performance criteria (QPC) on:
    - Floors on domestic tax revenues, the domestic primary budget balance, and social and priority spending.
    - Ceiling on wages and salaries.
    - Zero ceilings on new non-concessional external debt contracted or guaranteed by the public sector (continuous criterion), new external payments arrears (continuous criterion), new domestic payments arrears, and non-regularized expenditures.
  - Prepare an external borrowing plan to facilitate assessment of the QPCs on external debt.
  - Agree not to:
    1. Impose or intensify restrictions on payments and transfers for current international transactions.
    2. Introduce or modify multiple currency practices.
    3. Enter into bilateral payment agreements inconsistent with Article VIII of the IMF Articles of Agreement.
    4. Impose or intensify import restrictions for balance of payments purposes.
  - Adopt any new financial or structural measures necessary for policy success, in consultation with the IMF.

*Source: IMF staff report text (section 20–37) from the provided PDF chapter.*

### 38.      There are firm commitments to financing for the next 12 months following the third

### 1gnbea2023004 - 38.      There are firm commitments to financing for the next 12 months following the third

### Financing commitments and program prospects
- There are firm commitments to financing for the next 12 months following the third review with good prospects for the remainder of the program period.
- Expectation of additional budget support from other development partners including from the World Bank and the African Development Bank over the program period.
- The government will provide IMF staff with the information needed to assess progress in implementing the program as specified in the TMU and will consult with IMF staff on any measures that may be appropriate at the initiative of the government or whenever the IMF requests a consultation.

### Quantitative Performance Criteria (QPC) and Indicative Targets (IT) — selected figures (Cumulative from beginning of calendar year to end of month indicated, CFAF billion, unless otherwise indicated)
- Total domestic tax revenue (floor)
  - Mar Prel. 21.4 / Status not met
  - Jun Prel. 21.1 / Status not met
  - Sep 53.8 / 49.5 / Status not met
  - Mar QPC 87.1 / Revised IT 113.7 / QPC 113.7
  - Jun QPC 24.3 / IT 61.2 / Sep 99.1
- Wages and salaries (ceiling)
  - Mar Prel. 14.3 / Prel. 14.9 / Status not met
  - Jun 27.8 / 29.6 / Status not met
  - Sep QPC 41.8 / Revised 59.0 / 59.0
  - Mar IT 15.1 / Jun 29.5 / Sep 44.3
- Ceiling on new non-concessional external debt contracted or guaranteed by the central government (US$ millions)
  - All periods shown: 0.0 (met)
  - Mar/Jun/Sep/Dec entries: 0.0 / 0.0 / 0.0 / 0.0 / 0.0 / 0.0
- New external payment arrears (US$ millions, ceiling)
  - Mar 0.0 / 0.0 (met)
  - Jun 0.0 / 0.6 (not met)
  - Sep 0.0 / 0.0 / 0.0
  - Memorandum entries: 0.0 / 0.0 / 0.0
- New domestic arrears (ceiling)
  - All reported: 0.0 (met)
- Social and priority spending (floor) — defined as spending by the Ministries of Health, Education and the Ministry of Women, Family and Social Cohesion
  - Mar 12.5 / Prel. 12.7 (met)
  - Jun 26.0 / 28.1 (met)
  - Sep QPC 38.8 / Revised 51.6 / QPC 51.6
  - Mar IT 13.5 / Jun 28.1 / Sep 42.0
- Domestic primary balance (commitment basis, floor) — excludes grants, foreign and BOAD financed capital spending, and interest
  - Mar -10.8 / -21.6 (not met)
  - Jun -6.3 / -34.3 (not met)
  - Sep QPC -5.7 / Revised -2.9 / QPC -25.5
  - Mar IT 1.2 / Jun 2.4 / Sep 3.9
- Non regularized expenditures (DNTs, ceiling)
  - All reported: 0.0 (met)
- Memorandum Item: New concessional borrowing (Excludes IMF disbursements)
  - 2023 entries: 11.7 / 2.8 / 18.7
  - 2024 entries: 7.9 / 21.0 / 23.4 / 23.4
  - Additional memorandum: 10.3 / 18.9 / 21.6

### Prior Actions and Structural Benchmarks — summary of status and timing
- Prior Actions (examples)
  - Approve by Parliament the 2023 budget in line with the program parameters — Expenditure control — Prior Action (status not explicitly restated in excerpt).
  - Publish on the website an audit report of the High Commissioner for COVID-19 by the Audit Court — Strengthen governance — Prior Action.
- Structural Benchmarks (selected items and statuses)
  - Conduct regular in-year (quarterly) reconciliations between personnel and payroll records — Wage bill control — Met — March 2023.
  - Approve by the Council of Minister a multiannual staffing plan for 2023-25 and publish census report — Wage bill control — Not met — June 2023 — Reprogrammed to March 2024.
  - Establish an interface between the systems of the Treasury, BCEAO, and commercial banks and classify public bank accounts for the TSA — Expenditure control — Met — September 2023.
  - Create a unit dedicated to cash management operations and revise the Treasury Committee's mission — Cash management — Met — December 2023.
  - Create by ministerial order and implement the Technical Unit for Monitoring SOEs (UTAM) under the MoF — SOE oversight — Met — March 2023.
  - Complete installation of 10,000 pre-paid meters to largest residential clients that use post-paid meters — SOE oversight/EAGB — Met — June 2023.
  - Complete installation of additional 25,000 pre-paid meters to largest residential clients that use post-paid meters — SOE oversight/EAGB — December 2023.
  - Several items were proposed, met, not met, or reprogrammed with dates spanning March 2023 through June 2025 (see table for full listing).

### Public Financial Management, Revenue Mobilization, and Anti-Corruption measures
- Public Investment Program
  - Create an Excel-based medium-term PIP database centralizing quantitative information from Fichas de Projecto — Management of public investment — December 2023.
- Revenue Mobilization
  - Approve by Council of Ministers and submit to parliament: (i) the revised law on the general exemption regime; and (ii) the revised income tax and stamp duties bills — Strengthen tax framework — Met — December 2023 / June 2025 for the income tax and stamp duties bills.
  - Prepare redeployment plan for DGCI directors not appointed through open process — Revenue mobilization — December 2023 — Reprogrammed to December 2024.
- Anti-Corruption / Rule of Law
  - Resubmit to parliament the Law reforming the Asset Declaration Regime after elections — Strengthen anticorruption framework — Not met — September 2023 — Completed in October 2023.
  - Issue guidance to facilitate implementation of the 2022 decree regarding beneficial ownership (BO) information of entities awarded public contracts — Transparency/Expenditure Control — Met — March 2023.

### Technical Memorandum of Understanding — key definitions and program parameters
- Program exchange rates
  - Foreign currency denominated values for 2022 and 2023 will be converted into local currency (CFAF) using program exchange rates of, respectively, CFAF 622.4 and 611.4/US$ and cross rates as of end-December 2022 and 2023.
- A. Total Domestic Tax Revenue
  - Definition: includes direct and indirect taxes as presented in the central government financial operations table.
- B. Wage Bill
  - Definition: includes (i) personnel expenditure (“despesas de pessoal“), such as staff salaries and benefits, subsidies, and gratuities, and (ii) 50 percent of transfers to embassies.
- C. New Non-Concessional External Debt Contracted or Guaranteed by the Central Government
  - Central government excludes local administration, the central bank, and other public entities with autonomous legal personality not included in the government flow-of-funds table (TOFE).
  - Definition: all forms and maturities of new non-CFAF denominated debt contracted or guaranteed by the central government and CFAF denominated debt contracted with BOAD. A debt is considered contracted when all conditions for entry into effect have been met, including approval by the Minister of Finance.
  - Exclusions: normal trade credit for imports and other debt denominated in CFAF; disbursements from the IMF; debts subject to rescheduling or with verbal agreement.
  - Adjustor (BOAD Development and Cohesion Fund projects): ceiling adjusted upward by amounts for:
    - National Financing Fund for SMEs — up to CFAF 10 billion cumulative during the program period;
    - Construction of the Bissau General Hospital — up to CFAF 10 billion cumulative during the program period;
    - Development of urban roads in the City of Bissau — up to CFAF 10 billion cumulative during the program period;
    - Ceiling may be adjusted upward only up to CFAF 10 billion per year.
- D. New External Payment Arrears of the Central Government
  - Definition: debt service payments unpaid on due dates (after contractual grace periods) and remaining unpaid 30 days after due dates; excludes arrears on legacy HIPC external debt with pre-existing request for rescheduling/restructuring and amounts subject to litigation. Applies on a continuous basis effective on approval date of ECF arrangement.
- E. New Domestic Arrears of Central Government
  - Definition: CFAF-denominated accounts payable accumulated during the year and still unpaid by three months after the end of the month for wages and salaries (including pensions), and three months after due dates for goods, services and transfers. Includes CFAF-denominated debt service unpaid 30 days after due dates and non-CFAF accounts payable unpaid three months after due dates.
- F. Social and Priority Spending
  - Definition: spending in the Ministries of Health, Education and the Ministry of Women, Family and Social Cohesion.
- G. Domestic Primary Balance (Commitment Basis)
  - Definition: difference between government revenue and domestic primary expenditure on commitment basis; government revenue includes all tax and nontax receipts and excludes external grants; domestic primary expenditure consists of current expenditure plus domestically financed capital expenditure, excluding all interest payments and capital expenditure financed by project loans or grants.
- H. Non-Regularized Expenditure (DNTs)
  - Referenced in QPCs and treated as a ceiling (0.0 in reported periods).

*Source: IMF staff report excerpts, Guinea-Bissau ECF program tables and Technical Memorandum of Understanding.*

### 14.      Definition. Any treasury outlay not properly accounted for by the National Budget

### 1gnbea2023004 - 14.      Definition. Any treasury outlay not properly accounted for by the National Budget

### Definition and Reporting Requirement
- 14. Definition: Any treasury outlay not properly accounted for by the National Budget Directorate and/or not included in the budget.
- 15. Reporting requirement: The government will report any non-regularized expenditures on a continuous basis.

### Summary of Fiscal Reporting Requirements (selected items)
- Information: Central Government budget and execution — Frequency: Monthly — Reporting Deadline: 30 days after the end of the month — Responsible: DGPEE1/MF2
- Budgetary grants — Frequency: Quarterly — Reporting Deadline: 30 days after the end of the quarter — Responsible: DGPEE/MF
- Project grants — Frequency: Quarterly — Reporting Deadline: 30 days after the end of the quarter — Responsible: DGPEE/MF
- Change in the stock of domestic arrears — Frequency: Monthly — Reporting Deadline: 30 days after the end of the month — Responsible: DGPEE/MF
- Unpaid claims — Frequency: Monthly — Reporting Deadline: 30 days after the end of the month — Responsible: DGPEE/MF
- Interest arrears — Frequency: Monthly — Reporting Deadline: 30 days after the end of the month — Responsible: DGPEE/MF
- Proceeds from bonds issued in the regional WAEMU market — Frequency: Monthly — Reporting Deadline: 30 days after the end of the month — Responsible: DGPEE/MF
- Social and priority spending — Frequency: Quarterly — Reporting Deadline: 30 days after the end of the quarter — Responsible: DGPEE/MF
- Execution of top 30 externally financed projects4 — Frequency: Monthly — Reporting Deadline: 30 days after the end of the month — Responsible: DGPEE/MF
- Non-regularized expenditure — Frequency: As occuring — Responsible: DGPEE/MF
- Extrabudgetary expenditure for force majeure — Frequency: As occuring — Responsible: DGPEE/MF
- Cash balances of all Treasury bank accounts — Frequency: Monthly — Reporting Deadline: 30 days after the end of the month — Responsible: DGPEE/MF
- All bank instructions for external debt service — Frequency: Weekly — Reporting Deadline: 7 days after the payments — Responsible: DGPEE/MF
- Balance of Payments data — Frequency: Annually — Reporting Deadline: 30 days after approval — Responsible: BCEAO3
- Balance of Payments data — Frequency: Quarterly — Reporting Deadline: 45 days after the end of the quarter — Responsible: BCEAO
- Detailed consolidated balance sheet of commercial banks — Frequency: Monthly — Reporting Deadline: 45 days after the end of the month — Responsible: BCEAO
- Financial soundness indicators — Frequency: Semi-annually — Reporting Deadline: 90 days after the end of the half year — Responsible: BCEAO

### Debt Sustainability Analysis — Key Findings and Judgment
- Risk of external debt distress: High3
- Overall risk of debt distress: High
- Granularity in the risk rating: Sustainable
- Application of judgment: No
- Assessment summary:
  - The PV of public and publicly guaranteed (PPG) debt relative to GDP exhibits a prolonged and substantial breach of its indicative benchmark.
  - Significant breaches exist for the PV of external debt-to-exports and external debt service-to-exports ratios.
  - Offsetting factors cited:
    - (i) WAEMU currency union safeguards providing financial and technical support from regional debt market institutions and larger regional members.
    - (ii) The PV of public debt shows a consistent downward trend from 2023 onwards under the baseline scenario.
    - (iii) External DSA indicators are trending downwards consistent with sustainability over the medium-term.
  - Conclusion: Public debt is assessed as sustainable with high risk of debt distress.
- Conditionality: This conclusion is contingent on authorities’ continued commitment to an ambitious, yet feasible, fiscal adjustment aiming to bring the fiscal deficit within the 3 percent of GDP WAEMU convergence criterion by 2025.
- Risks identified:
  - Adverse political scenario
  - Limited capacity
  - Weaker cashew nut exports
  - Tighter global and regional financial conditions
  - Higher global food and oil prices
  - Climate change-related natural disasters
  - Financial stress in state-owned enterprises (SOEs) and high NPLs that could generate contingent liabilities and pose macrofinancial risks
- Potential improvements: Downward trend of baseline debt indicators would further improve with full multilateral donor re-engagement and a further shift towards debt obligations on concessional terms.
- Policy actions: Authorities are following IMF/WB advice on improving debt management and dedicating efforts to resolve legacy external arrears.

### Debt Coverage and Classification
- DSA perimeter: limited to the central government, the central bank and government-guaranteed debt.4
- Data limitations: Preclude inclusion of other units of general government and SOEs.
- Main SOE risk: Eletricidade e Águas da Guiné-Bissau (EAGB)
  - Non-publicly guaranteed debts of EAGB estimated at 1.2 percent of GDP in 2022 — included in the contingent liabilities shock.6
  - Government clearance of EAGB debt: CFAF 6.6 billion in 2017, CFAF 2.5 billion in 2018, CFAF 5.9 billion in 2019, CFAF 3.6 billion in 2020, and CFAF 5.2 billion in 2023.
  - Government guaranteed loans to EAGB: CFAF 5.6 billion in 2020 and CFAF 7.4 billion in 2021; guarantees increased to CFAF 15.0 billion in 2022 — these guarantees are included in the DSA.5
  - Non-guaranteed debt of EAGB in 2022 was predominantly unpaid invoices owed to the power supplier (Karpower). With EAGB’s increased revenue and the government’s implementation of the repayment plan, this amount will be significantly reduced in early 2024.6
- Debt classification approach:
  - Debt to BOAD is classified as external in a hybrid approach.
  - Bonds issued in the regional market are classified as domestic.
  - Debt denominated in CFAF to BOAD, amounting to 11.9 percent of GDP at end-2022, is classified as external.
  - Treasury securities issued in CFA francs in the regional market are treated as domestic for DSA purposes; the stock of such treasury securities at end-2022 was CFAF 251.4 billion, equivalent to 57 percent of domestic debt or 23.5 percent of GDP.7

### Capacity Building and Technical Assistance
- Authorities are seeking long-term technical assistance to improve debt recording, monitoring, and debt management.
- Support referenced:
  - World Bank PPAs under IDA’s SDFP supporting publication and expansion of the debt bulletin (in FY23) and technical assistance following the 2021 DeMPA.
  - World Bank support to EAGB on implementing a Management Improvement Plan and a financial restructuring plan.
  - IMF Statistics Department technical assistance in 2022–23 to expand data coverage and improve public debt data according to international guidance.

### Background and Debt Stock Highlights
- Public debt: rose to 80.4 percent of GDP in 2022; ratio increased by an estimated 1.6 percentage points with respect to 2021.
  - Increase drivers: higher-than-projected overall fiscal deficit, new government guarantees to EAGB, and recognition of legacy arrears.
  - External debt declined in 2022 due to better control of non-concessional borrowing, grant financing from the World Bank and other multilateral creditors, lower project loans disbursements and reliance on financing from the domestic regional market.
- Major lenders: BOAD and the World Bank are the main lenders of Guinea-Bissau’s external debt.
- Special SDR allocation:
  - End-August SDR 27.2 million allocation was transferred by the BCEAO as a currency repo operation of CFAF 21.6 billion (2.3 percent of GDP) with 20-year maturity and a single bullet payment at end-period.
  - Interest rate fixed at 0.05 percent; operation equivalent to a loan with a grant element of 62 percent.
  - CFAF 14.8 billion (69 percent) of the SDR on-lent resources was used to pre-pay BOAD principal due in September 2021–December 2022; CFAF 2 billion (9 percent) to pre-pay BOAD interest due in the same period; CFAF 4.8 billion (22 percent) used to finance COVID-related expenditures.11

### Selected Numeric Debt Stock and Ratios (from Text Table 2)
- Central Government Debt (Billions of CFAF; Percent of GDP):
  - 2020 Act.: 680.4 (77.7 percent of GDP)
  - 2021 Act.: 753.6 (78.8 percent of GDP)
  - 2022 Act.: 859.2 (80.4 percent of GDP)
  - 2023 Proj.: 913.2 (76.5 percent of GDP)
- External Debt (Billions of CFAF; Percent of GDP):
  - 2020 Act.: 360.1 (41.1 percent of GDP)
  - 2021 Act.: 385.4 (40.3 percent of GDP)
  - 2022 Act.: 419.0 (39.2 percent of GDP)
  - 2023 Proj.: 416.7 (34.9 percent of GDP)
- Multilateral external debt (Billions of CFAF; Percent of GDP):
  - 2020 Act.: 282.7 (32.3 percent)
  - 2021 Act.: 306.0 (32.0 percent)
  - 2022 Act.: 335.6 (31.4 percent)
  - 2023 Proj.: 337.7 (28.3 percent)
- IMF debt (Billions of CFAF; Percent of GDP):
  - 2020 Act.: 15.7 (1.8 percent)
  - 2021 Act.: 26.4 (2.8 percent)
  - 2022 Act.: 25.1 (2.3 percent)
  - 2023 Proj.: 32.1 (2.7 percent)
- IDA (Billions of CFAF; Percent of GDP):
  - 2020 Act.: 78.0 (8.9 percent)
  - 2021 Act.: 100.4 (10.5 percent)
  - 2022 Act.: 118.0 (11.0 percent)
  - 2023 Proj.: 119.1 (10.0 percent)
- BOAD (Billions of CFAF; Percent of GDP):
  - 2020 Act.: 138.6 (15.8 percent)
  - 2021 Act.: 122.0 (12.8 percent)
  - 2022 Act.: 127.4 (11.9 percent)
  - 2023 Proj.: 118.2 (9.9 percent)
- Domestic Debt (Billions of CFAF; Percent of GDP):
  - 2020 Act.: 320.4 (36.6 percent)
  - 2021 Act.: 368.2 (38.5 percent)
  - 2022 Act.: 440.2 (41.2 percent)
  - 2023 Proj.: 496.4 (41.6 percent)
- Treasury Securities held by regional banks (Billions of CFAF; Percent of GDP):
  - 2020 Act.: 119.9 (13.7 percent)
  - 2021 Act.: 179.2 (18.7 percent)
  - 2022 Act.: 230.2 (21.5 percent)
  - 2023 Proj.: 288.0 (24.1 percent)
- Payment Arrears (Billions of CFAF; Percent of GDP):
  - 2020 Act.: 27.1 (3.1 percent)
  - 2021 Act.: 18.9 (2.0 percent)
  - 2022 Act.: 12.2 (1.1 percent)
  - 2023 Proj.: 11.2 (0.9 percent)
- Guarantees (Billions of CFAF; Percent of GDP):
  - 2020 Act.: 10.6 (1.2 percent)
  - 2021 Act.: 13.5 (1.4 percent)
  - 2022 Act.: 20.0 (1.9 percent)
  - 2023 Proj.: 20.0 (1.7 percent)

### Notes on Legacy Arrears and External Creditor Composition
- Legacy external arrears at end-2022: US$5.7 million (to Brazil, Russia, and Pakistan).13
  - Agreement with Russia to cancel US$1.5 million.
  - Negotiations with Brazil (US$1.9 million) pending final approval from the Brazilian parliament.
  - Requests sent to Pakistan (US$2.2 million) since November 2021 to attempt resolving remaining external arrears.
- External debt composition: multilaterals held 80 percent of Guinea-Bissau’s external debt at end-2022; remaining external debt was bilateral, mainly to non-Paris Club creditors.

*Prepared jointly by the Staffs of the International Monetary Fund and the International Development Association — November 10, 2023.*

### 8.      Debt service to revenue excluding grants decreased to 64 percent in 2022 affected by the

### 8.      Debt service to revenue excluding grants decreased to 64 percent in 2022 affected by the pre-payment to BOAD in 2021

### Debt service, arrears, and debt suspension requests
- Debt service to revenue excluding grants decreased to 64 percent in 2022, affected by the pre-payment to BOAD in 2021.
- Payment of domestic arrears in 2022 represented 5.2 percent of revenues, mostly related to the settlement of cross-arrears due to government suppliers.
- The authorities requested by end-2020 and again in 2021 to join the Debt Service Suspension Initiative (DSSI).
  - Regarding the DSSI, the authorities declined to suspend the small debt service involved (0.7 percent of revenues) and some creditors did not respond.
- Even without any debt suspension, debt sustainability prospects are expected to be enhanced through:
  - commitment to limit non-concessional borrowing to levels agreed under IMF programs and IDA’s SDFP;
  - disclosing all public sector financial commitments involving debt.
- The materialization of efforts to enhance domestic revenue mobilization (outlined in paragraph 10) is also expected to improve the debt service-to-revenue ratio over the medium-term.

### Institutional support and composition of domestic debt
- Strong regional institutions provide support to Guinea-Bissau’s debt management capacity.
- WAEMU currency union regional institutions manage both:
  - the debt issued by Guinea-Bissau in the regional sovereign treasury securities market (UMOA-Titres);
  - the debt held by the central bank (BCEAO).
- These two components account for almost 87 percent of Guinea-Bissau’s domestic debt at end-2022.
- Guinea-Bissau’s borrowing through WAEMU sovereign securities market is expected to account for an insignificant share of available regional financing to the eight countries in this currency union.
  - Guinea-Bissau represented only 2 percent of the total regional issuances in 2022.
- CG Domestic Debt, 2022 (Percent of Total):
  - BCEAO, 30%
  - Loans, 6%
  - Arrears, 3%
  - Guarantees, 5%
  - Treasuries, 57%

### Macroeconomic assumptions — growth and inflation
- Real GDP growth:
  - After a strong GDP growth recovery of 6.4 percent in 2021, growth moderated to 4.2 percent in 2022 due to delayed cashew exports, partially compensated by strong growth of agricultural production and private sector investments.
  - Projection of real GDP growth in 2023 revised to 4.2 percent, reflecting the negative impact of declining income from cashew sales on consumption.
  - Increased subsistence farming, supported by good rainfall and high private investments (including energy), expected to have a positive effect on growth.
  - Medium-term growth supported by normalization of cashew exports and a more stable political context, with structural reforms (public financial management, revenue mobilization, anti-corruption, rule of law, business environment) expected to support private investment growth.
  - Long-term growth is projected at 4.1 percent, in line with the economy’s growth potential.
- Inflation:
  - Average inflation reached 7.9 percent in 2022 reflecting pressures on prices of imported goods, especially food and oil.
  - In 2023, average inflation is expected to reach 8.0 percent.
  - This is substantially above the 3 percent convergence WAEMU criteria, reflecting persistent inflationary pressures due to supply chain disruptions and food inflation, particularly the surge of international rice prices.
  - The WAEMU’s CFA is pegged to the euro, which is expected to appreciate by 3.3 percent against the US dollar in 2023.

### Key macro projections (selected, Percent of GDP or percent where indicated)
- Real GDP growth (Current DSA): 2021: 6.4; 2022: 4.2; 2023: 4.2; 2024: 5.0; 2025: 5.0; 2026: 5.0; 2027: 5.0; 2028: 4.5; Long Term: 4.1
- CPI inflation (Current DSA): 2021: 3.3; 2022: 7.9; 2023: 8.0; 2024: 3.0; 2025: 2.0; 2026: 2.0; 2027: 2.0; 2028: 2.0; Long Term: 2.0
- Primary fiscal balance (Current DSA): 2021: -4.3; 2022: -4.7; 2023: -3.2; 2024: -1.0; 2025: -0.8; 2026: -0.8; 2027: -0.7; 2028: -1.3; Long Term: -0.4
- Overall fiscal balance (commitment) (Current DSA): 2021: -5.9; 2022: -6.1; 2023: -5.6; 2024: -3.5; 2025: -3.0; 2026: -3.0; 2027: -3.0; 2028: -2.9
- Tax revenues (Current DSA): 2021: 9.8; 2022: 9.3; 2023: 9.6; 2024: 9.7; 2025: 10.2; 2026: 10.5; 2027: 10.8; 2028: 10.9; Long Term: 12.1
- Domestic primary expenditures (Current DSA): 2021: 14.7; 2022: 15.0; 2023: 14.4; 2024: 13.1; 2025: 12.3; 2026: 12.6; 2027: 12.7; 2028: 12.8; Long Term: 13.6
- Non-interest current account balance (Current DSA): 2021: 0.3; 2022: -8.9; 2023: -7.6; 2024: -3.7; 2025: -3.7; 2026: -3.3; 2027: -3.0; 2028: -2.8; Long Term: -2.7
- External debt (Current DSA): 2021: 40.3; 2022: 39.2; 2023: 34.9; 2024: 33.3; 2025: 31.6; 2026: 29.5; 2027: 27.5; 2028: 25.9; Long Term: 19.6
- Domestic debt (Current DSA): 2021: 38.5; 2022: 41.2; 2023: 41.6; 2024: 40.7; 2025: 40.0; 2026: 39.9; 2027: 39.8; 2028: 39.8; Long Term: 40.5

### Fiscal outlook, consolidation measures, and policy recommendations
- Fiscal deficit:
  - Overall fiscal deficit worsened to 6.1 percent in 2022.
  - Overall fiscal deficit in 2023 expected to decline to 5.6 percent of GDP, supported by higher revenues and budget support.
  - Tax collection by the Directorate-General for Taxes and Duties (DGCI) overperformed the target by CFAF 1.3 billion through June 2023, excluding cashew-related taxes.
  - Wage bill spending projected to decline nominally by 11 percent, decreasing from 6.2 percent of GDP to 4.9 percent.
  - Budget support projected to be higher, supported by bilateral and multilateral donors amid catalytic effects of the ECF arrangement.
- Medium-term target:
  - Overall deficit expected to converge to the WAEMU regional target of 3 percent of GDP by 2025.
  - An annual average of 0.9 percentage points of GDP adjustment in the domestic primary balance (on a commitment basis) is projected over 2023-26.
- Recommended consolidation measures:
  - Enhancing revenue mobilization:
    - Tax revenues expected to increase by around 0.9 percentage points between 2023 and 2026.
    - Measures include broadening of the tax base, simplifying the tax system, strengthening tax administration and compliance, facilitating DGCI’s professionalization, streamlining tax exemptions for imported goods, submitting revised laws on general exemption regime (structural benchmark (SB), end-December 2023) and revised income tax and stamp duties bills (SB, end-June 2025), implementing new VAT law, and TA-supported action plans for custom and tax administrations.
    - Reactivate tax audit program by auditing 50 large taxpayers (DGCI audited 9 out of 149 large taxpayers in the first half of 2023 and no audits between July-September).
    - Prepare an action plan to develop a registry of resource rights holders and undertake diagnosis of the fiscal regime for natural resources (SB, end-June 2024) with IMF TA support.
  - Strengthening PFM and expenditure control:
    - Government committed to decreasing domestic primary expenditures by around 1.8 percentage points of GDP between 2023 and 2026, of which 0.2 percentage points come from wage bill management measures.
    - Significant fiscal consolidation in 2024 reflects revenue mobilization, wage bill control and rationalization of discretionary spending, including one-off expenditures incurred in 2023.
    - Corrective actions since 2022 include dismissal of irregular hirings, total freezing of hirings, capping salary expenses for key ministries, inventory-taking of health and education facilities, new decree for contract vacancies, and elimination of two-thirds of advisor positions at key offices.
    - Improvements include validation/sign-off of census results by line ministries, rollout of biometric devices after pilot at MoEF, reintroduction of commitment control process, resumption of COTADO in September 2023, reconciliation of personnel and payroll records, implementation of a Treasury Single Account (TSA), and executing expenditure from the TSA starting with the wage bill.
    - The estimated fiscal saving of wage bill and expenditure control is about 1.9 percent of GDP by 2027.
  - Improving SOE oversight and mitigating fiscal risks:
    - IMF SOE oversight and fiscal risk TA mission identified EAGB as the main source of fiscal risks (other SOEs: APGB; AACGB; PetroGuin).
    - EAGB completed installation of 32,700 pre-paid electricity meters in five months, increasing monthly revenue from CFAF 1.5 billion to 1.9 billion.
    - EAGB current with payments to Karpower since April 2023 and purchasing additional 40,000 prepaid meters.
    - OMVG project nearly completed and will reduce power purchase costs substantially; transitional period required due to incomplete “Ring Line” Project financed by AfDB.
    - Government will continue renegotiation with Karpower; Audit Court auditing the power purchase contract and addendums; government to pursue accountability for irregularities.
  - Safeguarding social and priority spending and investment:
    - Authorities committed to safeguarding social and priority spending and public investment over the medium term.
    - During 2023-28, social and priority spending projected to increase by 0.6 percentage points of GDP compared to 2010-19.
    - Public investment projected to average around 7.3 percent of GDP per annum during 2023-28, 1.4 percentage points higher than pre-COVID-19 period.
    - Domestically financed capital expenditure projected to be higher than historical average, underpinned by fiscal space created.

### External sector and current account
- Non-interest current account deficit:
  - Reached 8.9 percent of GDP in 2022.
  - Projected to narrow to 7.6 percent of GDP for 2023, remaining higher than under the previous DSA.
  - Deterioration reflects terms of trade shocks from declining international cashew prices, delays in export campaign, and higher fuel and food import prices, including surge of international rice prices and export restrictions in South Asia.
  - Medium-term improvement expected due to sustained fiscal consolidation and more favorable terms of trade.

### Public debt dynamics and 2023 projections
- Public debt to GDP expected to decrease by 3.9 percentage points in 2023 due to:
  - lower fiscal deficit;
  - appreciation of the domestic currency;
  - higher nominal GDP.
- Stock of domestic debt projected to increase by 0.4 percentage points of GDP compared to 2022.
  - Authorities will continue to seek financing through issuance of treasury bills.
  - Stock of securities (held by local and regional commercial banks) projected to grow by 2.4 percentage points of GDP.
  - Stock of other domestic debt sources expected to fall in 2023.
  - Debt to BCEAO, loans from local commercial banks and domestic payment arrears projected to jointly drop by 0.5 percentage points of GDP.
- Stock of external debt projected to decrease by 4.3 percentage points of GDP, mostly driven by a concentrated debt repayment schedule in 2023 (particularly with BOAD) and a revaluation effect from the stronger domestic currency.

### Borrowing plan (selected)
- Sources and uses of debt financing (Volume of new debt and Present value of new debt reported in Text Table 4; figures shown as US$ million in source).
- Concessional debt and multilateral debt account for the planned new borrowing in 2023 and 2024.
  - Uses of debt financing highlighted: Urban Infrastructure and Agriculture allocations for 2023 and 2024.

### Realism of the baseline assumptions and borrowing strategy
- Assumptions:
  - Authorities will implement a prudent borrowing strategy prioritizing concessional financing for medium-term investment-related borrowing.
  - Contracting of new loans constrained under the fiscal consolidation strategy and ECF.
  - Gross annual project disbursements from loans and grants assumed between 60 and 72 percent of capital expenditure, which is expected to average 5.1 percent of GDP in the next five years, given low absorption capacity.
  - Multilateral creditors expected to provide most project financing on grant or concessional terms in the medium term.
  - Share of credits from the Fund, World Bank, and African Development Bank in total external public debt estimated at 42 percent in 2022.
  - Share of all multilateral creditors in total external public debt was 80 percent in 2022.
  - Past reliance on non-concessional borrowing from BOAD (largest holder of external public debt) will be reduced significantly in the medium-term; borrowing from BOAD projected to decline driven by debt repayment schedule concentrated in 2023-2025.
  - World Bank and IMF to support preparation of a MTDS through technical assistance.
  - Baseline assumes better investment planning and execution, and treasury securities with longer maturities (on average 3.8 years) expected to fill most non-investment-related financing needs in the medium-term (2024 onwards), mitigating refinancing risks.
  - In 2023, interest rates projected to increase to 8.0 percent for bonds with maturities of one to three years, and to 8.3 percent for bonds with maturities of four to seven years, reflecting tightening of financial conditions in the WAEMU.

*Source: Guinea-Bissau authorities and IMF staff (selected extracts from the IMF DSA chapter).*

### 14.      The macroeconomic scenario is broadly realistic. The non-interest current account deficit in

### 14.      The macroeconomic scenario is broadly realistic. The non-interest current account deficit in

### Macroeconomic scenario and drivers of debt dynamics
- The non-interest current account deficit in 2023-27 is projected to contribute to external debt accumulation, in line with debt dynamics over the past five years.
- Offsetting factors expected:
  - sustained growth;
  - increased reliance on committed grants (captured in the residual of the drivers of debt dynamics in Figure 3)27;
  - higher-than-expected inflation.
- Assumptions about donor behavior:
  - Multilateral donors will prioritize grant disbursements considering the structural fragility of the country, its large development needs, and limited access to alternative financing sources.
  - Fiscal consolidation and improvements in governance are expected to crowd in grants.
- Interest rate and financing-term assumptions26:
  - Short-term T-bills: 7.7 percent in 2023, 7.0 percent in 2024 and 6 percent from 2025 onwards.
  - Long-term bonds (4-7 years) assumed to provide funding for over 50 percent of the financing gap during the medium term (2023-2025).
  - Medium-term bonds (1-3 years) accounting for 32 percent of the financing.
- Historical caveats:
  - For 2018-2022, the reclassification of BOAD debt from domestic to external accounts for the large unexplained increase in external debt (Figure 3). For the 5-year forecast period, the residual is also affected by financing from treasury securities in the regional market, which are considered domestic debt in the DSA, but account for sizable capital inflows in the financial account.27

### Fiscal balance, growth projection, and volatility
- The projected three-year adjustment in the primary deficit is marginally larger than the 25th percentile observed in historical data from low-income countries (LICs) with Fund-supported programs (Figure 4).
- Real GDP growth:
  - Projected at 4.2 percent in 2023, consistent with a small fiscal multiplier.
- Historical relationship:
  - High import content of government spending and essentially zero correlation between real GDP growth and changes in the fiscal primary balance since 2010.
- Volatility note:
  - Actual fiscal results tend to be highly volatile in Guinea-Bissau.28

### Country classification and contingent liability stress tests
- Debt-carrying capacity:
  - Guinea-Bissau is assessed to have weak debt carrying capacity, unchanged from the January 2023 DSA.
  - Composite Indicator (CI) score: 2.55, based on October 2023 WEO data and 2022 CPIA. This score is below the 2.69 cutoff, resulting in a weak debt-carrying capacity.
- CI components (Text Table 5):
  - CPIA: coefficient 0.385, 10-year average value 2.503, contribution 0.963 (8%).
  - Real growth rate (in percent): coefficient 2.719, 10-year average value 4.486, contribution 0.125 (1%).
  - Import coverage of reserves (in percent): coefficient 4.052, 10-year average value 39.591, contribution 1.606 (63%).
  - Import coverage of reserves^2 (in percent): coefficient -3.990, 10-year average value 15.674, contribution -0.63 (-25%).
  - Remittances (in percent): coefficient 2.022, 10-year average value 4.69, contribution 0.094 (4%).
  - World economic growth (in percent): coefficient 13.520, 10-year average value 2.889, contribution 0.391 (15%).
  - CI Score: 2.55 (100%) — CI rating: Weak.
- Combined contingent liability shock (Text Table 6):
  - This DSA runs a stress test with an additional contingent liability shock of 5.2 percent of GDP instead of default values.29
  - Breakdown of the shock29: bank recapitalization (2 percent), EAGB debt (1.2 percent) and potential domestic arrears (2 percent).
  - Rationale: captures potential liabilities related to recapitalization needs of a systemic bank not meeting WAEMU minimum capital requirements, potential fiscal costs of operational losses of the electricity utility (EAGB), contingent liabilities linked with increased public guarantees, and the possibility of domestic arrears being larger than the 1.1 percent of GDP included in the debt stock at end-2022.
  - Current estimate builds on audits that still need to be validated by the authorities; authorities requested support from the World Bank to finalize those audits.30

### External debt sustainability (A)
- Risk assessment:
  - Guinea-Bissau’s risk of external debt distress remains high, as in the January 2023 DSA.
- Indicators under baseline (2023–43):
  - External debt-to-GDP indicator based on PV ratios remain below relevant indicative thresholds throughout the projection period under the baseline scenario.
  - PV of debt-to-exports ratio remains above the threshold until 2027 — a deterioration relative to the previous DSA.
  - Debt-service-to-export ratio significantly deteriorates from the January 2023 DSA due to protracted effects of the recent negative shock to cashew nut exports.
  - Indicators breach their indicative thresholds under the baseline, implying a mechanical ‘high’ risk rating.31
  - Note: since Guinea-Bissau is in a currency union with FX reserve pooling, the effective impact of these indicators is rather limited.
- Adverse commodity price stress test:
  - Designed to reflect vulnerability to cashew price fluctuations.
  - Hypothetical 25 percent fall in cashew export prices in the first year of the projection (Figure 1).32

### Public debt sustainability (B)
- Overall risk:
  - Guinea-Bissau’s overall risk of debt distress is assessed as high.
- Key projections and breaches:
  - PV of total public debt-to-GDP ratio stays above its indicative benchmark (35 percent) through 2033 — characterized as a substantial and prolonged breach.
  - Debt service as a percentage of revenues and grants increases to 88 percent in 2028 (impacted by the need to roll over costly short-term debt from regional market), then begins a declining trajectory reaching 54 percent in 2033.
  - Increase in debt service despite improvements expected reflects higher future amortization of existing debt in the medium run.
- Vulnerability to commodity price shock:
  - After a 25 percent drop in cashew prices:
    - PV of debt-to-GDP ratio reaches 73 percent in 2031 and stabilizes at this value.
    - Debt service-to-revenue ratio reaches 112 percent in 2028 before stabilizing at around 81 percent.

### Conclusions and policy recommendations
- Overall sustainability judgement:
  - Public debt is considered sustainable conditional on authorities’ commitment to fiscal consolidation toward WAEMU deficit convergence criteria and support from regional institutions.
  - External debt burden indicators show a medium-term downward trend, but PV of total public debt-to-GDP and indicators based on external debt-service ratios show large and prolonged breaches.
  - Support from regional institutions, debt markets, and larger regional currency union members with stronger debt carrying capacity bolsters capacity to carry domestic/regional debt beyond what the standard composite indicator captures.
  - Conclusion: Guinea-Bissau’s public debt is sustainable contingent on authorities’ commitments to sound policies in engagement with the Fund and other development partners.
- Under the staff’s baseline scenario:
  - Overall public debt burden falls below regional convergence criterion of 70 percent by 2026.
  - Total public debt declines from 80.4 percent of GDP estimated at end-2022 to 65.7 percent of GDP by 2028, if the policy agenda is successfully executed and barring unexpected external shocks.33
- Key policy actions to underpin baseline projection:
  - (i) Continued fiscal consolidation efforts including revenue enhancement measures, containing current spending below nominal GDP growth, a sharp reduction in the wage bill, and robust implementation of growth-enhancing reforms;
  - (ii) Prudent borrowing policies, including the avoidance of non-concessional project financing;
  - (iii) Enhanced debt management, with more rigorous compilation and monitoring of debt statistics, upgraded procedures and publication of regular debt reports to improve transparency;
  - (iv) Improved management of the existing loan pipeline and application of recognized assessment procedures to ensure criticality of investment projects.
- Possible improvements to baseline dynamics with full donor re-engagement:
  - (i) Substantial scaling up of grants by multilateral institutions;
  - (ii) Reprofiling of selected debt obligations to extend maturities and reduce interest rates when financing terms are favorable.

### Downside risks
- Significant downside risks to the baseline scenario; strong and sustained political commitment required to deliver envisaged medium-term fiscal adjustment.
- Key risk factors:
  - Weaker economic recovery;
  - Materialization of unexpected contingent liabilities;
  - Further tightening of financial conditions in the regional bond market;
  - Weakening global demand;
  - Continued pressure on exchange rate;
  - Disappointing cashew exports due to lower prices or climate events;
  - High global food and oil prices, including effects of a protracted political security crisis in Europe and the Middle East;
  - Climate change-related natural disasters;
  - Financial stress in state-owned enterprises generating contingent liabilities and adding fiscal pressures.
- If risks materialize:
  - Could lead to higher external and public debt burden indicators, increase risk of arrears accumulation, and potentially trigger social tensions and political instability that constrain fiscal adjustment.

### Authorities’ views
- Authorities broadly concur with staff’s views on debt sustainability and recommendations.
- Emphasized:
  - Commitment to agreed fiscal path and reforms while relying on concessional borrowing;
  - Need to carefully calibrate financing of the public investment plan and select investment projects with critical contributions to growth aligned with budget targets;
  - Improved coordination among agencies involved in the Debt Committee.
- Expectation:
  - Continued satisfactory performance during the Extended Credit Facility (ECF) will contribute to mitigating the country’s high risk of debt distress.

*Source: IMF staff analysis and projections as presented in the DSA chapter excerpt.*

### 4. Guinea

### Guinea-Bissau

### Program performance
- Four of the eight quantitative performance criteria were met and all but one structural benchmark observed.
- Missed quantitative targets were related to:
  - Minimum tax revenue mobilization and wage bill ceiling (unmet by small margins).
  - Domestic budget balance.
  - Ceiling on external arrears.
- Underpinning factors for missed targets:
  - Lower-than-expected cashew revenue.
  - Lower savings from the census of public workers in 2022.
  - Overrun on other current expenditures.
  - Delayed external debt service payments.
- Corrective measures taken by the government:
  - Stepped-up efforts to enhance revenue collection and compliance (i.e., DGCI professionalization).
  - Strengthened expenditure controls.
  - Ensured timely debt service payments.
- The only structural benchmark not met relates to the approval of the medium-term human resources plan, postponed to March 2024 to align with the 2024 budget.

### Recent economic developments and outlook
- Recent performance and drivers:
  - Economic growth for 2023 is projected at 4.2 percent, lower than the earlier anticipated 4.5 percent, due to reduced earnings from cashew exports despite a rise in overall agricultural production and private investments.
  - Estimated average inflation projected at 8 percent, driven by rising food prices and disruptions in the global rice market.
  - Current account deficit is expected to increase by 1.9 percentage points of GDP in 2023 compared to an estimate of 6.9 percent of GDP at the time of the second review.
- Fiscal near-term actions and outcomes:
  - Authorities cut monthly discretionary spending by about 20 percent of levels recorded in recent months to contain expenditure overruns.
  - These measures, tax administration improvements, and a “no new hiring” policy are expected to reduce the budget deficit by 0.9 percent of GDP in the last months of the year.
  - Primary budget deficit expected to be 2.2 percent of GDP in 2023 against 3.1 percent of GDP in 2022.
- Banking sector developments:
  - All banks now meet regional prudential requirements and maintain adequate capital levels, except for one undercapitalized bank.
  - Gross non-performing loans (NPLs) ratio fell from 19.4 percent in 2021 to 10.4 percent in 2022 following government resolution of cross-arrears with debtors of the undercapitalized bank.
  - Financial vulnerabilities due to sovereign debt and unfavorable exchange rate developments are now minimal.
- Medium-term outlook and risks:
  - Authorities concur with staff assessment: economy expected to grow by 5 percent annually on average over the medium term, assuming recovery in cashew exports, increased donor engagement, and better governance policies.
  - Inflation should stabilize at 2 percent.
  - Current account deficit anticipated to narrow in keeping with fiscal consolidation and improvements in terms of trade.
  - Key risks: trade fluctuations, unpredictable weather patterns, tightening financial conditions, heightened food insecurity, lower foreign financial inflows, and potential impacts on financial stability.
  - Mitigation strategy: step up fiscal consolidation (notably containing expenditures) and cover financing needs with mostly concessional resources.

### Policies and reforms for 2024 and the medium-term
- Overall strategy:
  - Secure fiscal consolidation while providing space for higher social and development spending.
  - Boost revenue mobilization, improve spending efficiency, strengthen fiscal governance and transparency, and address energy and banking sector vulnerabilities.
- Fiscal consolidation and targets:
  - Draft 2024 budget aligns with program parameters.
  - Domestic primary balance expected to improve by 1.8 percentage points of GDP in 2024.
  - Authorities aim to reduce the overall budget deficit and public debt below WAEMU thresholds of 3 percent and 70 percent of GDP, respectively, by 2025 and 2026.
  - Commitment to program QPC of a zero ceiling on new non-concessional borrowing and reliance on concessional resources in the financing strategy.
- Revenue mobilization and tax administration reforms:
  - Introduction of performance evaluation systems in revenue agencies to identify underperforming managers and replace them through public tender.
  - Ongoing audits of some large taxpayers selected on a risk basis.
  - Authorities value Fund technical assistance in tax administration and revenue agencies management.
- Expenditure and public financial management reforms:
  - Further measures to contain spending, reduce wage bill growth, and improve civil servant personal management.
  - Technical Committee of Arbitration of Budgetary Expenditure (COTADO) central in rationalizing non-priority expenditure with ex-post scrutiny by the Prime Minister.
  - Plan to eliminate ghost workers via a new census of public workers to generate significant wage bill savings.
  - Completion of the pilot phase of the IMF-supported blockchain project in 2023 and rollout to other ministries by 2024 to enhance public wage management.
  - Plans to allocate more resources to non-wage expenditure, introduce sustainable agricultural input support, and enforce fiscal transparency and accountability.

### Fiscal and debt outlook
- Debt sustainability:
  - Despite high risk of debt distress, debt remains sustainable due to authorities’ policies and donor engagement.
  - Stock of public and publicly guaranteed debt anticipated to decline to 76.5 percent of GDP in 2023 against 80.4 percent in 2022.
- Commitment to debt-policy constraints:
  - Continued compliance with zero ceiling on new non-concessional borrowing (program QPC).
  - Preference for concessional resources as part of overall financing.

### Mitigating fiscal risks (energy and utilities)
- Actions on public utility EAGB:
  - Over 32,700 pre-paid electricity meters installed in five months, resulting in a significant increase in EAGB's monthly revenue and improved bill payment to its energy supplier.
  - Plan to install an additional 40,000 pre-paid meters.
  - Regional hydropower project (OMVG) nearing completion to help reduce power purchase costs.
  - Ongoing efforts to complete the "Ring Line" Project.
  - Renegotiation of the contract with the energy supplier with World Bank legal and technical assistance.
  - Audit of power purchase transactions and commitment to hold managers accountable for irregularities and abuses.

### Strengthening governance and anti-corruption
- Transparency and audit actions:
  - Audit Court published the High Commissioner for COVID-19 audit report on its website and is auditing COVID-19 related transactions of other entities.
  - Directorate-General of Public Tenders (DGCP) expanding disclosure of beneficial ownership information to all public contracts through participation in COTADO.
- AML/CFT and justice sector:
  - With Fund technical assistance, authorities aim to enhance AML/CFT efforts per the revised action plan based on the 2023 WAEMU AML/CFT Law.
  - 2024 budget prioritizes construction of minimum infrastructure for the justice sector to address infrastructure challenges.

### Enhancing the integrity of the financial sector
- Actions on undercapitalized bank:
  - Government pursuing sale of its stake to a strategic investor who will recapitalize the bank to meet regulatory standards; investor has expressed renewed interest and final terms agreed.
  - Proposal to be submitted for evaluation by the WAEMU Regional Banking Commission.
  - If sale fails, government prepared to follow Banking Commission recommendations.
  - Plan to request an assessment of the bank's financial position and a full independent audit of the loan portfolio.
  - Government will prepare a report with a viable plan to recapitalize, resolve, or liquidate the bank as needed.

### Conclusion and requests to the Executive Board
- Government view:
  - New government taking significant steps to reinforce political stability and strengthen fiscal sustainability through rule of law, tax and spending measures, transparency, accountability, and mitigation of fiscal risks.
- Requests and appeals:
  - Authorities seek Executive Directors’ support for the completion of the third review under Guinea-Bissau’s ECF-supported program and for the authorities’ request for an augmentation of access.
  - Authorities request Directors’ support of waiver of nonobservance of performance criteria and revision of a performance criterion.

*Statement by Mr. Sylla, Executive Director for Guinea-Bissau, Mr. Matungulu, Alternate Executive Director for Guinea-Bissau and Mr. Lopes Varela, Advisor to the Executive Director for Guinea-Bissau — November 29, 2023*

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_Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1gnbea2023004.pdf_