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---

### Key context and challenges
- Guinea-Bissau experienced a very difficult period since the 1998-99 civil war, with continuing political instability, erratic government, and weak technical capacity resulting in a stagnating economy, increasing fiscal problems, and a virtual collapse of the government administration.
- Following a coup in September 2003 and elections in March, a new government took office in May 2004 with a program emphasizing short-term measures to restore the administration and normal rule-based fiscal management, and medium-term policies to improve the legal system and promote investment, reduce excessive regulation, and complete the privatization program.
- Main challenge: maintain political stability, especially given upcoming presidential elections; the government program emphasizes good governance, transparency and consultation.
- A recent military mutiny raises doubts about authorities’ ability to implement their program; causes must be addressed before full donor-supported programs can proceed.

### Economic and social conditions (selected figures and facts)
- Per capita income: US$185 (25 percent lower than in 1993).
- Human Development Index ranking: among the ten lowest internationally.
- WAEMU membership since 1997: monetary and exchange rate policies set for the Union as a whole.
- External support for the emergency budget amounted to almost €7 million through June.
- World Bank resumed disbursements for demobilization and arrears clearance in March 2004: US$15 million—5 percent of GDP.
- EU compensation for fishing rights represented more than 20 percent of revenue; disbursement was delayed, resulting in further arrears.
- After the war, wage expenditure nearly doubled; domestic primary deficit (commitment basis) remained around 4 percent of GDP (provisional data for 2003).
- Debt indicators at HIPC decision point (December 2000): NPV of debt-to-exports = 1,029; NPV of debt-to-government revenue = 1,254; average required debt relief calculated at 86 percent of the NPV of debt.
- Interim relief arrangements: Fund and World Bank interim relief of 100 percent and Paris Club creditors of 90 percent of debt service falling due at decision point; following nonperformance under the PRGF-arrangement, interim relief from the IMF and Paris Club creditors automatically stopped after 2001; World Bank interim relief declined to 90 percent in January 2004 and will reach the statutory limit by end-2007; AfDB extended 100 percent relief through 2006.

### Recent developments in 2003–2004
- Real GDP growth: estimated to have stagnated in 2003; agricultural production rebounded but other sectors declined.
- Consumer prices: remained flat during December 2002-03.
- Fiscal control collapsed during 2003 as political interference increased; domestic primary deficit around 4 percent of GDP.
- Salaries of most civil servants unpaid through the first nine months of 2003; administration virtually collapsed as morale declined and strikes increased.
- Financial system: very small—only one small bank operating in Bissau; two larger banks remained closed after the civil war; credit to the economy declined in 2003.
- External current account improved in 2003: trade deficit narrowed mostly due to higher cashew nut exports; imports declined as a ratio to GDP with a large drop in rice imports.
- Guinea-Bissau is one of the most indebted poor countries; debt service to other creditors continues to fall into arrears.

### Emergency Economic Management Plan (EEMP) and donor engagement
- EEMP based on an international partnership proposal from the UN ECOSOC Ad Hoc Advisory Group; UN established an Emergency Economic Management Fund (EEMF) to channel and monitor emergency budget support; assistance conditional on EEMP implementation and submission of detailed spending plans.
- Emergency budget for 2004 prepared on a “minimum needs” basis with technical assistance from the IMF, West AFRITAC, the World Bank, and AfDB; main objective: allow basic government functioning by providing for wages and basic allocations for health and education; included a treasury cash-flow plan for December 2003-June 2004.
- External support for the emergency budget amounted to almost €7 million through June; the EEMP and emergency budget were replaced by the government program for 2004-08 and a revised 2004 budget accepted by parliament by end-July 2004.
- Bilateral donor relationships largely ended; multilateral donors resuming disbursements: World Bank disbursements in March 2004 (US$15 million—5 percent of GDP) and development of an Interim Support Strategy through end-2005; discussions on EU budget support resumed; donor Round Table tentatively scheduled for December 15, 2004.

### Policy findings and recommendations
- Fiscal policy:
  - Aim to increase revenue and reduce personnel costs.
  - Strengthen tax administration and broaden the tax base.
  - Implement a medium-term public sector reform program to reduce public sector employment.
  - Immediate step: carry out a civil service census urgently and remove ghost workers.
- Institutional capacity:
  - Government program can only be implemented with considerable technical assistance in building institutions and capacity.
  - Strong technical assistance needed to address serious technical weaknesses in fiscal management and macroeconomic statistics.
- Fund engagement and sequencing:
  - Staff supports recommendation that the next step be emergency post-conflict assistance (EPCA).
  - Before finalizing EPCA discussions, evidence needed that causes of the recent military mutiny are being addressed and that government can implement policies.
  - EPCA should be part of a concerted international effort and geared toward preparing for a new PRGF arrangement, possibly over a two-year period, complemented by strong technical assistance.

### Short-Term Outlook and Policies (selected projections and measures)
- Macroeconomic outlook and growth projections:
  - Real GDP estimated to increase by 1-2 percent in 2004 and by around 3 percent in 2005.
  - End-period inflation expected to remain within WAEMU’s target of less than 3 percent by end-2004.
  - External current account balance, including official transfers, projected to become slightly positive in 2004.
- Administrative and fiscal measures prioritized:
  - Highest priority: paying government salaries on time.
  - Monthly payment of the electricity bill; provide regular small operating-cost allocations to ministries.
  - Centralize all revenue in the treasury account at the BCEAO; require MEF approval for all expenditure commitments; apply public procurement regulations.
  - Political appointees replaced by experienced technicians at head of revenue departments.
  - Expenditure adjustments: travel budget cut; revised budget for 2004 approved by parliament on July 29.
- Fiscal pressures and financing in 2004:
  - Domestic primary deficit projected to amount to almost 3 percent of GDP for July-December 2004.
  - Budget’s financing need amounts to almost 6 percent of GDP (€15 million) for the second half of 2004 (including payment of arrears incurred during January-June and debt service).
  - Remaining funds in the EEMF about €2 million at end-June; up to €10 million could be provided by the EU (conditional on meeting accounting requirements).
  - Authorities intend to give priority to wages and debt service to the Fund and the World Bank if the gap cannot be closed.
- Public sector pay and staffing:
  - Minimum salaries in the civil service raised by about 15 percent (to €26 per month); preliminary information indicates the wage bill for the military was almost tripled.
  - Agreement to harmonize public sector salaries based on reduction in remuneration for politicians; need to maintain overall wage bill within budget.
- Short-term risks:
  - Tax revenue not expected to recover significantly in second half of 2004.
  - Nontax revenue to be boosted by the EU’s compensation for fishing rights, but associated planned expenditure carried into second half of the year.
  - Authorities to conduct an immediate census of public servants.

### Medium-Term Outlook and Policies
- Comparative advantage and sectoral potential:
  - Emphasis on exploiting agriculture and fisheries: adequate fertile land, good rainfall; offshore waters highly productive.
  - Current structure: more than 90 percent of exports, about 20-25 percent of GDP, and more than 10 percent of fiscal revenue depend on cashew nuts; a further 35-40 percent of revenue comes from fishing licenses to foreign operators.
- Poverty and social indicators:
  - About two-thirds of the population living below the poverty line of US$2 per day.
  - Illiteracy rate: 70 percent in rural areas.
  - Life expectancy: 45 years.
  - HIV infection estimate: 3 percent of the population.
- Fiscal medium-term objective:
  - Need combination of revenue and expenditure measures to move the budget’s domestic primary deficit from 5 percent of GDP in 2005 (including cost of elections equivalent to 2 percent of GDP) to zero by 2007.
  - Revenue opportunities: low tax revenue-to-GDP ratio—almost half the WAEMU-area average—indicates scope for enhancement through widening the tax base and improving administration; domestic tax rates generally higher than in the rest of the region.
  - Expenditure containment: wage and wage-related expenditure claim almost 70 percent of revenue, double the WAEMU target; assume comprehensive public sector reform with the wage bill constant in nominal terms at recent levels.
- Financial sector and private sector revival:
  - WAEMU common minimum capital requirement seen as potentially excessive; authorities relaxed the requirement domestically.
  - A second commercial bank expected by end-2004, coincident with WAEMU’s regional microfinance bank.
  - World Bank, EU, and AfDB assistance for fisheries; EU support for road infrastructure.
- Downside risks:
  - Political instability risk high, especially with presidential elections in first half of 2005.
  - Limited administrative capacity and political pressures could divert resources from agriculture, finance, and infrastructure.
  - Uncertain financing for short- and medium-term budget gaps; severe expenditure cuts or renewed wage arrears would undermine reform implementation and donor reengagement.
- Technical assistance needs:
  - Urgent need to strengthen MEF functions, including macroeconomic statistics.
  - Staff urged authorities to finalize a technical assistance master plan for the MEF and prepare a broad national technical assistance plan.
- PRSP status:
  - Authorities attach great importance to the PRSP; latest draft lacked prioritization, costing, and a monitoring system.
  - Authorities intend to submit the PRSP to the Fund and the World Bank before end-2004, with missing elements to be added as capacity is strengthened.

### Medium-term fiscal scenarios (Box 3 key figures, in billions of CFAF)
- Low case (present trends) — Estimates and projections:
  - Revenue: 2004 23.5; 2005 23.7; 2006 24.9; 2007 26.1; 2008 27.4; 2009 28.8
  - Domestic primary expenditure: 2004 31.9; 2005 33.4; 2006 35.1; 2007 36.9; 2008 38.8; 2009 40.8
  - Debt service: 2004 35.0; 2005 20.6; 2006 22.0; 2007 21.2; 2008 23.3; 2009 21.3
  - Balance: 2004 -43.4; 2005 -30.4; 2006 -32.3; 2007 -32.0; 2008 -34.7; 2009 -33.3
  - In percent of GDP: 2004 -29.8; 2005 -19.9; 2006 -20.1; 2007 -19.0; 2008 -19.6; 2009 -17.9
  - Assumptions: real GDP growth of 2 percent per year; revenue and domestic primary expenditure constant in terms of GDP; World Bank interim relief to end after 2007.
- Reform scenario — Estimates and projections:
  - Revenue: 2004 23.5; 2005 23.7; 2006 27.6; 2007 30.3; 2008 32.5; 2009 34.9
  - Domestic primary expenditure: 2004 31.9; 2005 31.9; 2006 29.3; 2007 30.2; 2008 31.2; 2009 32.2
  - Debt service: 2004 35.0; 2005 20.6; 2006 22.0; 2007 6.6; 2008 7.5; 2009 8.7
  - Balance: 2004 -43.4; 2005 -28.8; 2006 -23.7; 2007 -6.5; 2008 -6.2; 2009 -6.1
  - In percent of GDP: 2004 -29.8; 2005 -18.8; 2006 -14.5; 2007 -3.7; 2008 -3.3; 2009 -3.0
  - Assumptions: annual real GDP growth to increase gradually to 4.3 percent by 2009; strong improvements in tax administration; wage bill constant in nominal terms; resumption HIPC interim relief in 2007 and completion point by end-2007.

### Box 4 — Renewed Access under EPCA to Guinea-Bissau (summary)
- Background and past EPCA use:
  - Guinea-Bissau made purchases under the EPCA in September 1999 and January 2000 for an amount equivalent to 25 percent of quota.
  - Transition from EPCA to a PRGF arrangement was not successfully completed due to reemergence of conflict after initiation of the EPCA.
  - Despite weak performance and domestic arrears, Guinea-Bissau has remained current in debt service obligations to the Fund.
- Rationale for renewed EPCA support:
  - Renewed EPCA support appears suitable to support UN-led stabilization efforts, subject to satisfactory resolution of the recent uprising.
  - Staff proposes initiating discussions on an EPCA-supported program covering up to an additional two-year period, for a total of three years (noncontiguous).
  - Possible further access under EPCA restricted to an amount not to exceed a total of 50 percent of quota in outstanding purchases under the EPCA.
  - Renewed access would likely be tranched to safeguard Fund resources.
- Conditions and safeguards:
  - Stronger justification needed for renewed purchases, including thorough risk assessment.
  - Each purchase supported by clear assessment of commitment to reform and progress in rebuilding administrative capacity.
  - Renewed access contingent on satisfactory resolution of the recent uprising and demonstration government can implement program policies.
- Staff appraisal key findings:
  - Political-military conflict reemergence led to stalled reforms, declining administrative capacity, deeper economic and fiscal problems, and increased poverty.
  - Government program forms a good basis for addressing problems but implementation capacity remains uncertain.
  - Initial measures show commitment to restoring rule-based government and good management; recent wage bill increases are a concern and offsetting measures urged.
  - Medium-term priorities: strengthen fiscal position, improve tax administration, widen tax base, control wage bill via public sector reform, and pursue structural reforms emphasizing deregulation and investment climate improvements.
  - Debt unsustainability must be addressed through the HIPC Initiative; until then staff recommends continuing to service multilateral debt and seek interim solutions with other creditors.
  - Renewed EPCA supported by staff as appropriate next step, but success requires concerted international effort and donor coordination; donor conference should precede approval of new EPCA.

### Relations with the Fund — selected facts
- Membership Status: Joined: March 24, 1977; Article VIII.
- Quota: 14.20 (SDR Million) 100.00 percent.
- Outstanding Purchases and Loans: First Credit Tranche: 0.36 2.50; PRGF Arrangements: 10.20 71.82.
- Latest PRGF: Approval Date Dec 15, 2000; Expiration Dec 14, 2003; Amount Approved 14.20; Amount Drawn 5.08.
- Projected payments to Fund (SDR Million):
  - Principal: 2004: 3.61; 2005: 2.12; 2006: 2.59; 2007: 2.17; 2008: 1.25
  - Charges/Interest: 2004: 0.09; 2005: 0.06; 2006: 0.05; 2007: 0.04; 2008: 0.03
  - Total (grouped rows): 3.70; 2.18; 2.64; 2.21; 1.28

### Selected economic and financial indicators (highlights)
- Real GDP at market prices (annual percentage change): 2000: 7.5; 2001: 0.2; 2002: -7.2; 2003: 0.6; 2004 (Est.): 1.7; 2005 (Proj.): 3.4
- Real GDP per capita (annual percentage change): 2000: 4.9; 2001: -2.2; 2002: -9.4; 2003: -1.8; 2004 (Est.): -0.8; 2005 (Proj.): 0.9
- Consumer price index (annual average): 2000: 8.6; 2001: 3.3; 2002: 3.3; 2004 (Est.): 1.6; 2005 (Proj.): 2.8
- Domestic revenue (excluding grants, annual percentage change): 2000: 23.4; 2001: -16.9; 2002: -11.6; 2003: -0.2; 2004 (Est.): 20.2; 2005 (Proj.): -8.9
- Overall balance (commitment basis, including grants, percent of GDP): 2000: -10.8; 2001: -11.7; 2002: -12.0; 2003: -13.8; 2004 (Est.): -12.7; 2005 (Proj.): -12.2
- External current account including official transfers (percent of GDP): 2000: -5.6; 2001: -22.3; 2002: -10.7; 2003: -2.3; 2004 (Est.): 0.7; 2005 (Proj.): -5.2
- Net present value of external debt/exports (in percent): 2000: 934; 2001: 824; 2002: 1,241; 2003: 1,206; 2004 (Est.): 1,093; 2005 (Proj.): 881

### Central Government operations (selected figures; percent of GDP projections)
- Budgetary revenue: 2004: 17.8; 2005 (Proj.): 15.4
- Tax revenue: 2004: 11.4; 2005 (Proj.): 7.1
- Grants: 2004: 14.1; 2005 (Proj.): 15.6
- Total expenditure: 2004: 44.1; 2005 (Proj.): 43.0
- Current expenditure: 2004: 33.8; 2005 (Proj.): 28.2
- Capital expenditure: 2004: 10.3; 2005 (Proj.): 14.8
- Overall balance, including grants (commitment basis, percent of GDP): 2004: -16.4; 2005 (Proj.): -12.7
- Overall balance, excluding grants (commitment basis, percent of GDP): 2004: -21.1; 2005 (Proj.): -28.3
- Financing gap (+ = financing needs, percent of GDP): 2004: 7.4; 2005 (Proj.): 5.7

### Monetary and balance of payments highlights
- Broad money (in billions of CFA francs): 2004: 127.4; 2005 (Proj.): 134.5
- Exports, f.o.b. (percent of GDP): 2004: 62.2; 2005 (Proj.): 67.3; 2009 (Proj.): 94.9
- Imports, f.o.b. (percent of GDP): 2004: -82.0; 2005 (Proj.): -94.9; 2009 (Proj.): -136.9
- Current transfers (net, percent of GDP): 2004: 53.5; 2005 (Proj.): 44.7; 2009 (Proj.): 57.3
  - Fishing license fees (percent of GDP): 2004: 10.7; 2005 (Proj.): 10.3; 2009 (Proj.): 20.2
  - Workers' remittances (percent of GDP): 2004: 2.2; 2005 (Proj.): 9.9; 2009 (Proj.): 30.1
- Current account including official transfers (percent of GDP): 2004: -2.3; 2005 (Proj.): 0.7; 2006 (Proj.): -6.8; 2009 (Proj.): -7.7
- Financing gap (percent of GDP): 2004: 15.5; 2005 (Proj.): 53.9; 2009 (Proj.): 27.0
- Scheduled debt service (percent of exports and service credits): 2004: 46.7; 2005 (Proj.): 38.9; 2009 (Proj.): 26.8

### External arrears and public debt (selected items)
- Total stock of arrears outstanding (end of year, in millions of U.S. dollars): 1999: 139.1; 2000: 148.0; 2001: 156.6; 2002: 192.4; 2003: 176.4
- Multilateral arrears (end of year, in millions of U.S. dollars): 1999: 35.2; 2000: 35.6; 2001: 36.6; 2002: 25.5; 2003: 28.7
- Bilateral arrears (end of year, in millions of U.S. dollars): 1999: 103.9; 2000: 112.4; 2001: 120.0; 2002: 166.9; 2003: 147.7
- Nominal stock of Total Public and Publicly Guaranteed Debt (end-period, millions of U.S. dollars): 2003: 900; 2004: 886; 2005: 874; 2006: 863; 2007 (Proj.): 613; 2009 (Proj.): 573
- NPV of Total Public and Publicly Guaranteed Debt (end-period, millions of U.S. dollars): 2003: 768; 2004: 647; 2005: 647; 2006: 646; 2007 (Proj.): 407; 2009 (Proj.): 391

### Social and MDG indicators (selected)
- Net primary enrollment ratio: 53.5
- Youth literacy rate (percent age 15-24): 44.1; 51.0; 59.5; 60.8 (values across periods)
- Under-five mortality rate (per 1,000): 253.0; 235.0; 211.0; 205.0 (values across periods)
- Infant mortality rate (per 1,000 live births): 153.0; 143.0; 130.0; 122.0 (values across periods)
- Maternal mortality ratio (modeled estimate, per 100,000 live births): 910.0
- Proportion of births attended by skilled health personnel: 25.0
- HIV prevalence among females (percent ages 15-24): 3.0
- Number of children orphaned by HIV/AIDS: 4,300
- Incidence of tuberculosis (per 100,000 people): 271.1
- Tuberculosis cases detected under DOTS (percent): 37.0
- Forest area (percent of total land area): 85.5; 77.8
- Access to improved water source (percent of population): 56.0
- Access to improved sanitation (percent of population): 44.0 (one anomalous cell shows "2wqa" in source table)

### Implementation, governance, and technical assistance
- Authorities agreed to conduct a civil servant survey to help contain the wage bill and to harmonize salaries across the public sector.
- Revisions in public sector wage scales estimated to have resulted in an almost doubling of base wages; civil service salaries raised by an average of 67 percent and military wages by an average of 200 percent.
- Preliminary estimate: personnel costs would be more than 3 percent of GDP (€ 7.5 million) higher in 2005 than in 2004.
- Technical assistance delivered and planned across fiscal management, tax administration, customs, monetary statistics, national accounts, and balance of payments; West AFRITAC experts from November 2003 to June 2004 on Public Expenditure Management; Tax Administration; Customs Administration; Budget Preparation and Execution.
- GDDS participation: metadata posted since November 2001; outstanding weaknesses in national accounts and some fiscal and external reporting.

### IMF Board and staff recommendations
- Staff proposes the next Article IV consultation be held on the standard 12-month cycle.
- Staff supports renewed emergency post-conflict assistance (EPCA) as the appropriate next Fund engagement, contingent on satisfactory resolution of the recent uprising and demonstration of policy implementation capacity.
- Directors welcomed the government’s 2004-08 program as a basis to restore fiscal discipline and pursue structural reforms, but urged building a strong track record on program implementation to secure renewed international assistance.
- Emphasis on technical and financial assistance from the international community and preparation of a country-wide technical assistance plan.

*Source: Executive Summary of staff report on Guinea-Bissau; IMF staff report content extracted from the provided PDF content unit.*

### Executive Summary ......................................................................................................

### Executive Summary

### Key context and challenges
- Guinea-Bissau experienced a very difficult period since the 1998-99 civil war, with continuing political instability, erratic government, and weak technical capacity resulting in a stagnating economy, increasing fiscal problems, and a virtual collapse of the government administration.
- Following a coup in September 2003 and elections in March, a new government took office in May 2004. The government program emphasizes short-term measures to restore the administration and normal rule-based fiscal management, and medium-term policies to improve the legal system and promote investment, reduce excessive regulation, and complete the privatization program.
- Main challenge: maintain political stability, especially given upcoming presidential elections. The government program emphasizes good governance, transparency and consultation; lack of these factors was identified in the draft PRSP as a main factor behind the 1998-99 war.
- A recent military mutiny raises doubts about authorities’ ability to implement their program; causes must be addressed before full donor-supported programs can proceed.

### Economic and social conditions (selected figures and facts preserved)
- Per capita income of US$185 (25 percent lower than in 1993).
- Guinea-Bissau remains one of the poorest countries in the world with a Human Development Index ranking among the ten lowest internationally.
- WAEMU membership since 1997: monetary and exchange rate policies are set for the Union as a whole.
- External support for the emergency budget amounted to almost €7 million through June (Box 2).
- The World Bank resumed disbursements for demobilization and arrears clearance in March 2004 for a total of US$15 million—5 percent of GDP.
- The EU’s compensation for fishing rights represented more than 20 percent of revenue; its disbursement was delayed pending a review, resulting in further arrears.
- After the war, wage expenditure nearly doubled; domestic primary deficit (on a commitment basis) remained around 4 percent of GDP (provisional data for 2003).
- Debt indicators at HIPC decision point (December 2000): NPV of debt-to-exports = 1,029; NPV of debt-to-government revenue = 1,254; average required debt relief calculated at 86 percent of the NPV of debt.
- Interim relief arrangements: Fund and World Bank interim relief of 100 percent and Paris Club creditors of 90 percent of debt service falling due at decision point; following nonperformance under the PRGF-arrangement, interim relief from the IMF and Paris Club creditors automatically stopped after 2001; World Bank interim relief declined to 90 percent in January 2004 and will reach the statutory limit by end-2007; AfDB extended 100 percent relief through 2006.

### Recent developments in 2003–2004
- Economic activity remained sluggish in 2003; agricultural production rebounded but other sectors declined; real GDP growth is estimated to have stagnated in 2003.
- Consumer prices remained flat during December 2002-03 due to falling domestic demand and adequate food harvests; the economic situation remained broadly unchanged in early-2004.
- Fiscal control collapsed during 2003 as political interference increased; domestic primary deficit around 4 percent of GDP; debt service to the IMF increased sharply compared to 2002 reflecting maturing purchases under the 1999-2000 EPCA.
- Salaries of most civil servants were unpaid through the first nine months of 2003 as authorities prioritized payments for goods and services to promote political support; the administration virtually collapsed as morale declined and strikes increased.
- Financial system remains very small: only one small bank operating in Bissau as two larger banks remained closed after the civil war. Credit to the economy, mainly for import financing, declined in 2003.
- The external current account balance improved in 2003: the trade deficit narrowed mostly due to higher cashew nut exports; imports declined as a ratio to GDP with a large drop in rice imports reflecting high stocks and a good domestic harvest; the surplus on the capital account declined partly due to lower capital transfers after completion of an EU-financed infrastructure project.
- Guinea-Bissau is one of the most indebted poor countries; debt service to other creditors continues to fall into arrears.

### Emergency Economic Management Plan (EEMP) and donor engagement
- The EEMP, based on an international partnership proposal from the UN ECOSOC Ad Hoc Advisory Group, aimed to break the deadlock in donor assistance and included political and financial governance policies. The UN established an Emergency Economic Management Fund (EEMF) to channel and monitor emergency budget support; assistance from the EEMF was conditional on EEMP implementation and submission of detailed spending plans.
- A key element was an emergency budget for 2004 prepared on a “minimum needs” basis with technical assistance from the IMF, West AFRITAC, the World Bank, and AfDB; main objective: allow basic government functioning by providing for wages and basic allocations for health and education; included a treasury cash-flow plan for December 2003-June 2004.
- External support for the emergency budget amounted to almost €7 million through June; the EEMP and emergency budget were replaced by the government program for 2004-08 and a revised 2004 budget accepted by parliament by end-July 2004.
- Bilateral donor relationships largely ended; multilateral donors are resuming disbursements: World Bank disbursements in March 2004 (US$15 million—5 percent of GDP) and development of an Interim Support Strategy through end-2005; discussions on EU budget support resumed following progress under mandatory post-coup political dialogue; a donor Round Table conference is tentatively scheduled for December 15, 2004.

### Policy findings and recommendations
- Fiscal policy:
  - Aim to increase revenue and reduce personnel costs.
  - Strengthen tax administration and broaden the tax base.
  - Implement a medium-term public sector reform program to reduce public sector employment.
  - Immediate step: carry out a civil service census urgently and remove ghost workers.
- Institutional capacity:
  - The government program can only be implemented with considerable technical assistance in building institutions and capacity.
  - A strong technical assistance effort is needed to address serious technical weaknesses in all aspects of fiscal management and macroeconomic statistics.
- Fund engagement and sequencing:
  - Staff supports the recommendation in the EPA that the next step in Fund engagement be emergency post-conflict assistance (EPCA).
  - Before finalizing discussions on an EPCA-supported program, there should be evidence that the causes of the recent military mutiny are being addressed and that the government is able to implement its policies.
  - EPCA should be part of a concerted international effort and geared toward helping the authorities prepare for a new PRGF arrangement, possibly over a two-year period, complemented by strong technical assistance.

*Source: Executive Summary of staff report on Guinea-Bissau.*

### 10.      The discussions took place against the background of a stagnating economy,

### 10. The discussions took place against the background of a stagnating economy, severe fiscal problems, and a virtually collapsed public administration.

### Short-Term Outlook and Policies
- Macroeconomic outlook and growth projections:
  - Real GDP is estimated to increase by 1-2 percent in 2004 and by around 3 percent in 2005.
  - End-period inflation is expected to remain within the WAEMU’s target of less than 3 percent by the end of 2004.
  - External current account balance, including official transfers, is projected to become slightly positive in 2004.
- Administrative and fiscal measures prioritized:
  - Highest priority: paying government salaries on time.
  - Monthly payment of the electricity bill; provide regular small operating-cost allocations to ministries to restart basic operations.
  - Strengthening ministry organization following review of respective laws.
  - Financial management measures already taken: centralizing all revenue in the treasury account at the BCEAO; requiring MEF approval for all expenditure commitments; applying public procurement regulations.
  - Political appointees replaced by experienced technicians at head of revenue departments.
  - Expenditure adjustments: travel budget cut; revised budget for 2004 approved by parliament on July 29 restoring a normal framework for expenditure allocations.
- Fiscal pressures and financing in 2004:
  - Domestic primary deficit projected to amount to almost 3 percent of GDP for July-December 2004.
  - Budget’s financing need amounts to almost 6 percent of GDP (€15 million) for the second half of 2004 (including payment of arrears incurred during January-June and debt service).
  - Remaining funds in the EEMF amounted to about €2 million at end-June; up to €10 million could be provided by the EU (conditional on meeting accounting requirements).
  - Authorities intend to give priority to wages and debt service to the Fund and the World Bank if the gap cannot be closed; seek further cuts in operating expenditure; if shortfalls are substantial, further wage arrears would be likely.
- Public sector pay and staffing:
  - Agreement to harmonize public sector salaries based on reduction in remuneration for politicians; staff stressed need to maintain overall wage bill within budget.
  - Recent measures noted: minimum salaries in the civil service were raised by about 15 percent (to €26 per month); preliminary information indicates that the wage bill for the military was almost tripled.
- Cooperation with donors and sectoral priorities:
  - Authorities intend to cooperate closely with the World Bank on reducing excessive regulation and rehabilitating the electricity sector.
  - Authorities regret the EU withdrawal from the DASP and will seek alternative donor financing to rebuild private sector strength.
- Short-term risks and administrative capacity:
  - Tax revenue not expected to recover significantly in second half of 2004.
  - Nontax revenue to be boosted by the EU’s compensation for fishing rights, but associated planned expenditure carried into second half of the year.
  - Authorities to conduct an immediate census of public servants to complement a file-by-file civil service review.

### Medium-Term Outlook and Policies
- Comparative advantage and sectoral potential:
  - Emphasis on exploiting agriculture and fisheries: adequate fertile land, good rainfall; offshore waters among most productive for fishing in West Africa.
  - Current structure: more than 90 percent of exports, about 20-25 percent of GDP, and more than 10 percent of fiscal revenue depend on cashew nuts; a further 35-40 percent of revenue comes from fishing licenses to foreign operators.
  - Poverty and social indicators (as reported): about two-thirds of the population is living below the poverty line of US$2 per day; illiteracy rate is 70 percent in rural areas; life expectancy is 45 years; 3 percent of the population is estimated to be infected by HIV.
- Medium-term policy agenda and constraints:
  - Government program objectives: accelerating economic growth, reducing poverty, stabilizing the fiscal situation; policies remain to be detailed, costed, and based on improved basic data.
  - Need for a combination of revenue and expenditure measures to move the budget’s domestic primary deficit from 5 percent of GDP in 2005 (including cost of elections equivalent to 2 percent of GDP) to zero by 2007.
  - Revenue opportunities: Guinea-Bissau’s low tax revenue-to-GDP ratio—almost half the WAEMU-area average—indicates scope for revenue enhancement through widening the tax base and improving administration; domestic tax rates are generally higher than in the rest of the region.
  - Expenditure containment: wage and wage-related expenditure claim almost 70 percent of revenue, double the WAEMU target; projected assumption of a comprehensive public sector reform program with the wage bill remaining constant in nominal terms at recent levels.
- Medium-term scenarios (Box 3): key figures (In billions of CFAF)
  - Low case (present trends) — Estimates and projections:
    - Revenue: 2004 23.5; 2005 23.7; 2006 24.9; 2007 26.1; 2008 27.4; 2009 28.8
    - Domestic primary expenditure: 2004 31.9; 2005 33.4; 2006 35.1; 2007 36.9; 2008 38.8; 2009 40.8
    - Debt service: 2004 35.0; 2005 20.6; 2006 22.0; 2007 21.2; 2008 23.3; 2009 21.3
    - Balance: 2004 -43.4; 2005 -30.4; 2006 -32.3; 2007 -32.0; 2008 -34.7; 2009 -33.3
    - In percent of GDP: 2004 -29.8; 2005 -19.9; 2006 -20.1; 2007 -19.0; 2008 -19.6; 2009 -17.9
    - Assumptions: real GDP growth of 2 percent per year; revenue and domestic primary expenditure constant in terms of GDP; World Bank interim relief to end after 2007.
  - Reform scenario — Estimates and projections:
    - Revenue: 2004 23.5; 2005 23.7; 2006 27.6; 2007 30.3; 2008 32.5; 2009 34.9
    - Domestic primary expenditure: 2004 31.9; 2005 31.9; 2006 29.3; 2007 30.2; 2008 31.2; 2009 32.2
    - Debt service: 2004 35.0; 2005 20.6; 2006 22.0; 2007 6.6; 2008 7.5; 2009 8.7
    - Balance: 2004 -43.4; 2005 -28.8; 2006 -23.7; 2007 -6.5; 2008 -6.2; 2009 -6.1
    - In percent of GDP: 2004 -29.8; 2005 -18.8; 2006 -14.5; 2007 -3.7; 2008 -3.3; 2009 -3.0
    - Assumptions: annual real GDP growth to increase gradually to 4.3 percent by 2009; strong improvements in tax administration; wage bill constant in nominal terms; resumption HIPC interim relief in 2007 and completion point by end-2007.
- Financial sector and private sector revival:
  - Concern that WAEMU’s common minimum capital requirement could be excessive for Guinea-Bissau’s small market; authorities relaxed the requirement domestically.
  - A second commercial bank expected by end-2004, coincident with WAEMU’s regional microfinance bank.
  - World Bank, EU, and AfDB assistance for fisheries (surveillance, research, development of local fisheries); EU support for road infrastructure.
- Downside risks:
  - Political instability risk remains high, especially with presidential elections in first half of 2005.
  - Limited administrative capacity and political pressures could divert resources from agriculture, finance, and infrastructure.
  - Uncertain financing for short- and medium-term budget gaps; severe expenditure cuts or renewed wage arrears would undermine reform implementation and donor reengagement.
- Technical assistance needs:
  - Urgent need to strengthen MEF functions, including macroeconomic statistics.
  - Staff urged authorities to finalize a technical assistance master plan for the MEF for submission to donors and to prepare a broad national technical assistance plan.
- PRSP status:
  - Authorities attach great importance to the PRSP; agreed latest draft lacked prioritization, costing, and a monitoring system.
  - Intend to submit the PRSP to the Fund and the World Bank before end-2004, with missing elements to be added as technical capacity is strengthened.

### Ex-Post Assessment and Future Fund Involvement
- Authorities’ response to the EPA and governance agenda:
  - Broad agreement with the EPA; key priorities: improving political situation through emphasis on good governance and transparency; strengthen fiscal management; reduce regulations to minimize corruption.
  - Plans to strengthen the judiciary and increase transparency, including reviving consultation mechanisms with social partners and civil society.
  - Authorities welcome close international monitoring and technical assistance in these areas.
- Financing strategy and Fund involvement:
  - Authorities preferred an early return to a PRGF arrangement to resume interim debt relief and advance toward the HIPC completion point.
  - Acknowledged need to build implementation capacity before a PRGF-supported program given negative experience with 2000-03 arrangement.
  - Agreed with EPA recommendation that renewed emergency post-conflict assistance (EPCA) would be the best option.

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

### Box 4. Renewed Access under EPCA to Guinea-Bissau

### Box 4. Renewed Access under EPCA to Guinea-Bissau

### Background and past EPCA use
- Guinea-Bissau made purchases under the EPCA in September 1999 and January 2000 for an amount equivalent to 25 percent of quota.
- The transition from EPCA to a PRGF arrangement was not successfully completed due to the reemergence of conflict after the initiation of the EPCA; the conflict did not end until the military coup in September 2003 (though recent events suggest that the conflict may be still ongoing).
- Guinea-Bissau continued to lack the institutional and administrative capacity necessary to develop and implement a comprehensive economic program that could be supported by a Fund arrangement.
- Despite weak economic performance and a sizeable buildup of domestic arrears (including to the civil service), Guinea-Bissau has remained current in its debt service obligations to the Fund, unlike other external creditors that stopped interim debt relief.

### Rationale for renewed EPCA support
- Renewed Fund support under the EPCA appears to be the most suitable way for the Fund to support ongoing UN-led efforts to promote stabilization in Guinea-Bissau, subject to satisfactory resolution of the recent uprising.
- Consistent with the Board decision in April 2004 to extend “the length of EPCA-supported programs, in total, to as long as three years” staff proposes initiating discussions on an EPCA-supported program covering up to an additional two-year period, for a total of three, albeit noncontiguous, years.
- Possible further access under the EPCA would be restricted to an amount not to exceed a total of 50 percent of quota in outstanding purchases under the EPCA.
- To safeguard Fund resources, there would be a stronger presumption that renewed access to Fund resources under the EPCA would be tranched.

### Conditions and safeguards for renewed purchases
- In considering purchases of EPCA after such an interruption, stronger justification would be needed than for the earlier purchases, including a more thorough assessment of the risks to program implementation.
- Each purchase would be supported by a clear assessment of Guinea-Bissau’s commitment to reform, and of progress in rebuilding administrative and program implementation capacity.
- Renewed access would be contingent on satisfactory resolution of the recent uprising and demonstration that the government is able to implement the program’s policies.

### Staff appraisal — key findings (paragraphs 28–39)
- Political and economic context:
  - The political-military conflict of 1998-99 reemerged after 1999, leading to stalled reforms, declining administrative capacity, deeper economic and fiscal problems, and increased poverty.
  - The transition from military coup to an elected government with a broad reform platform was encouraging but the political situation remains fragile given the government’s minority status in parliament, next year’s presidential elections, and painful fiscal measures ahead.
  - A key development failure cause over thirty years has been policies serving the interests of the political and military elite in Bissau.
- Program implementation capacity and initial measures:
  - The government program forms a good basis for addressing economic and financial problems, but the authorities’ ability to implement it remains uncertain.
  - Initial measures show strong commitment to program objectives, including restoring rule-based government and good management; national consensus on the program is still lacking.
  - Staff welcomes initial measures to restore fiscal control, but notes a recent increase in the wage bill was disappointing and urges offsetting measures (including rapidly following up on the civil service census and ensuring wages are paid only to workers actually present).
- Medium-term policy priorities:
  - Strengthen the fiscal position: improve tax administration, widen the tax base, and bring the public sector wage bill under control through public sector reform.
  - Substantial technical assistance and financial support from donors will be required to implement such programs.
  - Structural policies should emphasize deregulation and improvements in the investment climate; rapid reduction of excessive regulation is recommended as a low-cost, quick measure.
  - Membership of the WAEMU has helped maintain price and exchange rate stability; the fixed exchange rate system increases the importance of structural reforms for external competitiveness.
- Debt and external assistance:
  - Guinea-Bissau’s unsustainable external debt and mounting debt service arrears can only be addressed in the context of the HIPC Initiative.
  - Until then, staff recommends continuing to service debt to multilateral institutions and resuming discussions with other creditors on interim solutions; new assistance should be mainly in the form of grants.
- PRSP and donor coordination:
  - Authorities prefer to submit a full PRSP; staff urges ensuring broad domestic consultation and eventual inclusion of detailed costings and a monitoring system in updates.
  - Continued strong policy implementation must be complemented by considerable donor support and substantial technical assistance focused on institution and capacity building.
  - Renewed EPCA is supported by staff as the appropriate next step in Fund engagement, providing time for donors to reengage, alleviating debt service burden to the Fund, and assisting in strengthening administrative capacity prior to a PRGF.
  - New EPCA can only succeed within a concerted international effort based on strong donor coordination, including regional institutions; a donor conference should precede approval of new EPCA.
  - Staff urges authorities to rapidly seek assistance with preparing a country-wide technical assistance plan and supports requests for additional technical assistance in the Fund’s area of competence.

*Box 4. Renewed Access under EPCA to Guinea-Bissau — IMF staff summary*

### 40.      Staff proposes that the next Article IV consultation with Guinea-Bissau be held

### Staff proposes that the next Article IV consultation with Guinea-Bissau be held on the standard 12-month cycle

### Recommendation
- Staff proposes that the next Article IV consultation with Guinea-Bissau be held on the standard 12-month cycle.

### Selected economic and financial indicators (highlights from Table 1)
- Real GDP at market prices (annual percentage change): 2000: 7.5; 2001: 0.2; 2002: -7.2; 2003: 0.6; 2004 (Est.): 1.7; 2005 (Proj.): 3.4
- Real GDP per capita (annual percentage change): 2000: 4.9; 2001: -2.2; 2002: -9.4; 2003: -1.8; 2004 (Est.): -0.8; 2005 (Proj.): 0.9
- GDP deflator (annual percentage change): 2000: 3.2; 2001: -5.1; 2002: 4.8; 2003: -2.9; 2004 (Est.): 3.3; 2005 (Proj.): 2.0
- Consumer price index (annual average): 2000: 8.6; 2001: 3.3; 2002: 3.3; 2003: ...; 2004 (Est.): 1.6; 2005 (Proj.): 2.8
- Exports, f.o.b. (based on U.S. dollar values, annual percentage change): 2000: 21.3; 2001: -19.5; 2002: 7.2; 2003: 16.2; 2004 (Est.): 8.2; 2005 (Proj.): 7.0
- Imports, f.o.b. (based on U.S. dollar values, annual percentage change): 2000: 8.3; 2001: 10.6; 2002: -10.3; 2003: 0.5; 2004 (Est.): 15.8; 2005 (Proj.): 15.7
- Export volume (annual percentage change): 2000: 25.6; 2001: 3.8; 2002: -0.6; 2003: 8.0; 2004 (Est.): 4.1; 2005 (Proj.): 5.4
- Import volume (annual percentage change): 2000: 35.7; 2001: -3.4; 2002: -14.5; 2003: -8.0; 2004 (Est.): 7.2; 2005 (Proj.): 15.0
- Domestic revenue (excluding grants, annual percentage change): 2000: 23.4; 2001: -16.9; 2002: -11.6; 2003: -0.2; 2004 (Est.): 20.2; 2005 (Proj.): -8.9
- Total expenditure (annual percentage change): 2000: 56.3; 2001: -10.5; 2002: -22.8; 2003: 10.0; 2004 (Est.): 30.7; 2005 (Proj.): -17.7
- Credit to government (net, percent of beginning-of-period stock of broad money): 2000: 17.8; 2001: -0.7; 2002: 4.9; 2003: -4.2; 2004 (Est.): -4.3; 2005 (Proj.): -1.3
- Credit to the rest of the economy (percent of beginning-of-period stock of broad money): 2000: -62.2; 2001: -1.2; 2002: -5.1; 2003: -37.0; 2004 (Est.): 16.4; 2005 (Proj.): 5.5
- Broad money (percent of beginning-of-period stock of broad money): 2000: 67.7; 2001: 9.9; 2002: 24.1; 2003: 13.6; 2004 (Est.): 28.5; 2005 (Proj.): 5.5
- Velocity (GDP/broad money): 2000: 2.4; 2001: 2.1; 2002: 1.6; 2003: 1.4; 2004 (Est.): 1.1; 2005 (Proj.): 1.1
- Gross domestic investment (percent of GDP): 2000: 11.3; 2001: 14.4; 2002: 8.9; 2003: 11.1; 2004 (Est.): 15.2; 2005 (Proj.): 15.0
- Gross domestic savings (percent of GDP): 2000: -8.5; 2001: -20.1; 2002: -12.5; 2003: -2.9; 2004 (Est.): 0.2; 2005 (Proj.): -3.3
- Budgetary revenue (percent of GDP): 2000: 19.2; 2001: 16.8; 2002: 15.3; 2003: 15.6; 2004 (Est.): 17.8; 2005 (Proj.): 15.4
- Overall balance (commitment basis, including grants, percent of GDP): 2000: -10.8; 2001: -11.7; 2002: -12.0; 2003: -13.8; 2004 (Est.): -12.7; 2005 (Proj.): -12.2
- Overall balance (commitment basis, excluding grants, percent of GDP): 2000: -24.9; 2001: -26.2; 2002: -18.1; 2003: -21.5; 2004 (Est.): -28.3; 2005 (Proj.): -20.6
- External current account (including official current transfers, percent of GDP): 2000: -5.6; 2001: -22.3; 2002: -10.7; 2003: -2.3; 2004 (Est.): 0.7; 2005 (Proj.): -5.2
- Excluding official current transfers (percent of GDP): 2000: -17.2; 2001: -31.3; 2002: -12.7; 2003: -5.6; 2004 (Est.): -6.6; 2005 (Proj.): -7.5
- Net present value of external debt/exports of goods and nonfactor services (in percent): 2000: 934; 2001: 824; 2002: 1,241; 2003: 1,206; 2004 (Est.): 1,093; 2005 (Proj.): 881

### Central Government operations (selected figures from Table 2; in billions of CFA francs and percent of GDP projections)
- Budgetary revenue (2004 actual, 2005 projection): 2004: 17.8; 2005 (Proj.): 15.4 (percent of GDP)
- Tax revenue (2004 actual, 2005 projection): 2004: 11.4; 2005 (Proj.): 7.1 (percent of GDP)
- Grants (2004 actual, 2005 projection): 2004: 14.1; 2005 (Proj.): 15.6 (percent of GDP)
- Total expenditure (2004 actual, 2005 projection): 2004: 44.1; 2005 (Proj.): 43.0 (percent of GDP)
- Current expenditure (2004 actual, 2005 projection): 2004: 33.8; 2005 (Proj.): 28.2 (percent of GDP)
- Capital expenditure (2004 actual, 2005 projection): 2004: 10.3; 2005 (Proj.): 14.8 (percent of GDP)
- Overall balance, including grants (commitment basis, percent of GDP): 2004: -16.4; 2005 (Proj.): -12.7
- Overall balance, excluding grants (commitment basis, percent of GDP): 2004: -21.1; 2005 (Proj.): -28.3
- Financing gap (+ = financing needs, percent of GDP): 2004: 7.4; 2005 (Proj.): 5.7 (Table shows financing gap under different scenarios: see Table 2 projections)

### Monetary survey (Table 3, selected items; in billions of CFA francs and percent of beginning-of-period money stock)
- Net foreign assets (2004 actual, 2005 projection): 2004: 107.8; 2005 (Proj.): 116.3 (in billions of CFA francs)
- Net domestic assets (2004 actual, 2005 projection): 2004: 17.2; 2005 (Proj.): 19.6 (in billions of CFA francs)
- Broad money (liabilities, 2004 actual, 2005 projection): 2004: 127.4; 2005 (Proj.): 134.5 (in billions of CFA francs)
- Currency in circulation (2004 actual, 2005 projection): 2004: 117.0; 2005 (Proj.): 123.4 (in billions of CFA francs)
- Credit to the economy (2004 actual, 2005 projection, percent of beginning-of-period money stock): 2004: 2.7; 2005 (Proj.): 3.1
- Broad money growth (percent of beginning-of-period money stock): 2000: 67.7; 2001: 9.9; 2002: 24.1; 2003: 13.6; 2004 (Est.): 28.5; 2005 (Proj.): 5.5

### Balance of payments (selected items from Table 4; in percent of GDP and levels where indicated)
- Exports, f.o.b. (percent of GDP): 2004: 62.2; 2005 (Proj.): 67.3; 2006 (Proj.): 72.0; 2009 (Proj.): 94.9
- Imports, f.o.b. (percent of GDP): 2004: -82.0; 2005 (Proj.): -94.9; 2006 (Proj.): -104.9; 2009 (Proj.): -136.9
- Services (net, percent of GDP): 2004: -26.1; 2005 (Proj.): -29.5; 2006 (Proj.): -31.5; 2009 (Proj.): -38.0
- Current transfers (net, percent of GDP): 2004: 53.5; 2005 (Proj.): 44.7; 2006 (Proj.): 46.9; 2009 (Proj.): 57.3
  - Official transfers (percent of GDP): 2004: 34.9; 2005 (Proj.): 24.9; 2006 (Proj.): 25.5; 2009 (Proj.): 26.8
  - Fishing license fees (percent of GDP): 2004: 10.7; 2005 (Proj.): 10.3; 2006 (Proj.): 12.2; 2009 (Proj.): 20.2
  - Private transfers (percent of GDP): 2004: 7.2; 2005 (Proj.): 12.1; 2006 (Proj.): 14.2; 2009 (Proj.): 30.5
    - Workers' remittances (percent of GDP): 2004: 2.2; 2005 (Proj.): 9.9; 2006 (Proj.): 13.9; 2009 (Proj.): 30.1
- Current account including official transfers (percent of GDP): 2004: -2.3; 2005 (Proj.): 0.7; 2006 (Proj.): -6.8; 2009 (Proj.): -7.7
- Capital and financial balance (percent of GDP): 2004: -8.9; 2005 (Proj.): -34.1; 2006 (Proj.): -15.3; 2009 (Proj.): -19.1
- Overall balance (percent of GDP): 2004: -7.0; 2005 (Proj.): -48.7; 2006 (Proj.): -36.4; 2009 (Proj.): -16.1
- Financing gap (+) (percent of GDP): 2004: 15.5; 2005 (Proj.): 53.9; 2006 (Proj.): 44.9; 2009 (Proj.): 27.0
- Memorandum — Scheduled debt service (in percent of exports and service credits): 2004: 46.7; 2005 (Proj.): 38.9; 2006 (Proj.): 41.1; 2009 (Proj.): 26.8

### External arrears and public debt (selected items from Tables 6 and 7)
- Total stock of arrears outstanding (end of year, in millions of U.S. dollars): 1999: 139.1; 2000: 148.0; 2001: 156.6; 2002: 192.4; 2003: 176.4
- Multilateral arrears (end of year, in millions of U.S. dollars): 1999: 35.2; 2000: 35.6; 2001: 36.6; 2002: 25.5; 2003: 28.7
- Bilateral arrears (end of year, in millions of U.S. dollars): 1999: 103.9; 2000: 112.4; 2001: 120.0; 2002: 166.9; 2003: 147.7
- Nominal stock of Total Public and Publicly Guaranteed Debt (end-period, in millions of U.S. dollars, selected years and projections): 2003: 900; 2004: 886; 2005: 874; 2006: 863; 2007 (Proj.): 613; 2008 (Proj.): 592; 2009 (Proj.): 573
- NPV of Total Public and Publicly Guaranteed Debt (end-period, in millions of U.S. dollars, selected years and projections): 2003: 768; 2004: 647; 2005: 647; 2006: 646; 2007 (Proj.): 407; 2008 (Proj.): 399; 2009 (Proj.): 391

### Medium-term projections (Table 8, 2004–09; annual percentage change or percent of GDP as indicated)
- Real GDP at market prices: 2004: 1.7; 2005 (Proj.): 3.4; 2006 (Proj.): 3.8; 2007 (Proj.): 4.0; 2008 (Proj.): 4.3; 2009 (Proj.): 4.3
- Real GDP per capita: 2004: -0.8; 2005 (Proj.): 0.9; 2006 (Proj.): 1.3; 2007 (Proj.): 1.4; 2008 (Proj.): 1.7; 2009 (Proj.): 1.7
- Consumer price index (annual average): 2004: 1.6; 2005 (Proj.): 2.8; 2006–2009 (Proj.): 3.0 each year
- Exports, f.o.b. (based on U.S. dollar values, percent of GDP): 2004: 8.2; 2005 (Proj.): 7.0; 2006 (Proj.): 7.1; 2007 (Proj.): 7.1; 2008 (Proj.): 7.2; 2009 (Proj.): 7.2
- Imports, f.o.b. (based on U.S. dollar values, percent of GDP): 2004: 15.8; 2005 (Proj.): 15.7; 2006 (Proj.): 10.6; 2007 (Proj.): 9.9; 2008 (Proj.): 9.1; 2009 (Proj.): 8.8
- Domestic revenue (excluding grants, percent of GDP): 2004: 20.2; 2005 (Proj.): -8.9; 2006 (Proj.): 16.5; 2007 (Proj.): 9.9; 2008 (Proj.): 7.4; 2009 (Proj.): 7.3
- Total expenditure (percent of GDP): 2004: 30.7; 2005 (Proj.): -17.7; 2006 (Proj.): -0.9; 2007 (Proj.): 3.6; 2008 (Proj.): 4.0; 2009 (Proj.): 4.3
- Gross domestic investment (percent of GDP): 2004: 15.2; 2005 (Proj.): 15.0; 2006 (Proj.): 15.1; 2007 (Proj.): 15.2; 2008 (Proj.): 15.3; 2009 (Proj.): 15.4
- Gross domestic savings (percent of GDP): 2004: 0.2; 2005 (Proj.): -3.3; 2006 (Proj.): -4.1; 2007 (Proj.): -4.9; 2008 (Proj.): -5.3; 2009 (Proj.): -5.6
- Budgetary revenue (percent of GDP): 2004: 17.8; 2005 (Proj.): 15.4; 2006 (Proj.): 16.8; 2007 (Proj.): 17.2; 2008 (Proj.): 17.2; 2009 (Proj.): 17.2
- Domestic primary balance (percent of GDP): 2004: -5.8; 2005 (Proj.): -5.3; 2006 (Proj.): -1.1; 2007 (Proj.): 0.0; 2008 (Proj.): 0.7; 2009 (Proj.): 1.3
- Overall balance (commitment basis, including grants, percent of GDP): 2004: -12.7; 2005 (Proj.): -12.2; 2006 (Proj.): -8.1; 2007 (Proj.): -6.6; 2008 (Proj.): -5.6; 2009 (Proj.): -4.7
- External current account (including official current transfers, percent of GDP): 2004: 0.7; 2005 (Proj.): -5.2; 2006 (Proj.): -6.8; 2007 (Proj.): -7.4; 2008 (Proj.): -7.6; 2009 (Proj.): -7.7
- Net present value of external debt/exports of goods and nonfactor services (in percent): 2004: 881.3; 2005 (Proj.): 836.1; 2006 (Proj.): 757.1; 2007 (Proj.): 685.6; 2008 (Proj.): 622.0; 2009 (Proj.): 565.8
- Nominal GDP at market prices (in billions of CFA francs): 2004: 145.6; 2005 (Proj.): 153.7; 2006 (Proj.): 164.4; 2007 (Proj.): 176.1; 2008 (Proj.): 189.2; 2009 (Proj.): 203.3

*Sources: Guinea-Bissau authorities; BCEAO; IMF Finance Department; and staff estimates and projections.*

### 1. Population below US$ 1 a day (percent)..                   ..                   ..                   ..              

### _cr0569 - 1. Population below US$ 1 a day (percent)

### Millennium Development Goals — Key indicators for Guinea-Bissau
- Table title: Table 9. Guinea-Bissau: Millennium Development Goals
- Periods shown in table: 1990, 1995, 2001, 2002, 2010 (and some later columns with partial years); later columns include 2004, 2005 (Jan-Jun, Jul-Dec).

- Goal 1: Eradicate extreme poverty and hunger
  - 3. Share of income or consumption held by poorest 20 percent (percent): 5.2
  - Target 2: Halve, between 1990 and 2015, the proportion of people suffering hunger
  - 4. Prevalence of child malnutrition (percent of children under 5): 25.0 (appears under a later column)
  - 5. Population below minimum level of dietary energy consumption (percent): (no numeric value provided in the table cells shown)

- Goal 2: Achieve universal primary education
  - Target 3: Ensure that, by 2015, children will be able to complete a full course of primary schooling
  - 6. Net primary enrollment ratio (percent of relevant age group): 53.5
  - 7. Percentage of cohort reaching grade 5: (no numeric value provided in the table cells shown)
  - 8. Youth literacy rate (percent age 15-24): 44.1, 51.0, 59.5, 60.8 (four values shown in sequence across columns)

- Goal 3: Promote gender equality and empower women
  - Target 4: Eliminate gender disparity in primary and secondary education preferably by 2005 and to all levels of education by 2015
  - 9. Ratio of girls to boys in primary and secondary education (percent): 64.9
  - 10. Ratio of young literate females to males (percent ages 15-24): 42.5, 51.0, 61.8, 63.6 (four values shown)
  - 11. Share of women employed in the nonagricultural sector (percent): (no numeric value provided)
  - 12. Proportion of seats held by women in the national parliament (percent): 20.0, 10.0, 8.0, 8.0 (four values)

- Goal 4: Reduce child mortality
  - Target 5: reduce by two-thirds between 1990 and 2015, the under-five mortality rate
  - 13. Under-five mortality rate (per 1,000): 253.0, 235.0, 211.0, 205.0 (four values)
  - 14. Infant mortality rate (per 1,000 live births): 153.0, 143.0, 130.0, 122.0 (four values)
  - 15. Immunization against measles (percent of children under 12-months): (no numeric value provided)

- Goal 5: Improve maternal health
  - Target 6: Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio.
  - 16. Maternal mortality ratio (modeled estimate, per 100,000 live births): 910.0
  - 17. Proportion of births attended by skilled health personnel: 25.0

- Goal 6: Combat HIV/AIDS, malaria and other diseases
  - Target 7: Halt by 2015, and begin to reverse, the spread of HIV/AIDS
  - 18. HIV prevalence among females (percent ages 15-24): 3.0 (appears in one column)
  - 19. Contraceptive prevalence rate (percent of women ages 15-49): (no numeric value provided)
  - 20. Number of children orphaned by HIV/AIDS: 4,300 (appears in one column)
  - Target 8: Halt by 2015, and begin to reverse, the incidence of malaria and other major diseases
  - 21. Prevalence of death associated with malaria: (no numeric value provided)
  - 22. Share of population in malaria risk areas using effective prevention and treatment: (no numeric value provided)
  - 23. Incidence of tuberculosis (per 100,000 people): 271.1
  - 24. Tuberculosis cases detected under DOTS (percent): 37.0

- Goal 7: Ensure environmental sustainability
  - Target 9: Integrate the principles of sustainable development into policies and programs. Reverse the loss of environmental resources
  - 25. Forest area (percent of total land area): 85.5, 77.8 (two values shown)
  - 26. Nationally protected areas (percent of total land area): (no numeric value provided)
  - 27. GDP per unit of energy use (PPP $ per kg oil equivalent): (no numeric value provided)
  - 28. CO2 emissions (metric tons per capita): 0.8, 0.8, 0.2 (three values shown)
  - 29. Proportion of population using solid fuels: (no numeric value provided)

- Target 10: Halve by 2015 proportion of people without access to safe drinking water
  - 30. Access to improved water source (percent of population): 56.0

- Target 11: Achieve by 2020 significant improvement for at least 100 million slum dwellers
  - 31. Access to improved sanitation (percent of population): 44.0 (and an anomalous table cell showing "2wqa")
  - 32. Access to secure tenure (percent of population): (no numeric value provided)

- Goal 8: Develop a Global Partnership for Development
  - Target 16: Develop and implement strategies for productive work for youth.
    - 45. Unemployment rate of population ages 15-24 (total): (table lists Female and Male but no numeric values shown)
  - Target 17: Provide access to affordable essential drugs
    - 46. Proportion of population access with access to affordable essential drugs: (no numeric value provided)
  - Target 18: Make available new technologies, especially information and communications
    - 47. Fixed line and mobile telephones (per 1,000 people): (no numeric value provided)
    - 48. Personal computers (per 1,000 people): (no numeric value provided)

- Sources cited in table: World Bank; and Guinea-Bissau authorities.
- Notes in table:
  - 1/ The target reported corresponds to the authorities' own objectives in the draft PRSP.
  - 2/ Targets 12-15 and indicators 33-44 are excluded because they can not be measured on a country specific basis. These are related to official development assistance, market access, and the HIPC initiative.

### Observations from the MDG table (as provided)
- Several core social and health indicators are reported with multiple time-period values (e.g., youth literacy, under-five mortality, infant mortality, tuberculosis incidence).
- Some indicators lack numeric values in the table cells provided (e.g., immunization against measles, contraceptive prevalence rate, several environmental and access indicators).
- One sanitation cell contains the string "2wqa" (appears anomalous in the data row for Access to improved sanitation).

### Table reference line
- Table 9. Guinea: Millennium Development Goals (concluded)

---

### Summary of Government Operations, 2004-2005 (Table 10)
- Table title: Table 10. Summary of Government Operations, 2004-2005 1/ (In billions of CFA francs)
- Columns shown include: 2004 Est., 2005 Jan-Jun Revised, 2005 Jul-Dec Revised, 2005 Year Proj. Budget, 2005 Revised Budget

Key fiscal line items and numeric values:
- Revenue: 8.5, 14.9, 23.5, 23.7
- Tax: 4.9, 5.5, 10.4, 12.0
- Nontax 2/: 3.7, 9.4, 13.1, 11.6
- Domestic primary expenditure: 12.9, 19.1, 31.9, 31.8
- Wage and wage-related exp. 2/ 3/: 6.2, 8.4, 14.5, 16.1
- Goods and services: 1.7, 5.3, 7.0, 7.2
- Transfers: 0.3, 4.0, 4.3, 3.0
- Other current expenditure: 4.2, 0.7, 4.9, 4.3
- Domestically-financed capital exp.: 0.5, 0.8, 1.2, 1.3
- Domestic primary balance (commitment basis): -4.3, -4.1, -8.5, -8.2
- Current year arrears: 10.5, -4.5, 6.0, 0.0
- Domestic primary balance (cash basis): 6.2, -8.6, -2.5, -8.2
- Debt and financing: -4.2, -3.6, -7.9, -20.5
- External debt service and financing (net): 5.5, 0.6, 6.1, -16.2
- Budget support grants: 8.7, 2.0, 10.6, 0.0
- External debt service (net paid/due): -3.2, -1.4, -4.5, -16.2
- Domestic debt service and financing (net): -9.7, -4.3, -14.0, -4.3
- BCEAO: -0.5, -0.3, -0.7, -0.7
- Project accounts: -0.9, -0.6, -1.5, -0.4
- Arrears previous year(s): -8.3, -3.4, -11.8, -3.2
- Financing gap: 2.0, -12.3, -10.3, -28.8

Memorandum items:
- Domestic primary balance (commitment; in perce-): -3.0, -2.8, -5.8, -5.3 (note: truncated label in source)
- External debt arrears (in billions of CFAF): 17.5 (appears in a later column)

Notes:
- 1/ Excluding expenditure and offsetting financing of foreign-financed projects.
- 2/ Excludes CFAF 2.5 billion for the peace keeping mission in Liberia.
- 3/ Includes wages, pensions, food for the military and police, and transfers to parliament and semi-autonomous government organizations.
- Source: Guinea-Bissau authorities; and Fund staff estimates and projections.

---

### Relations with the Fund — Key facts and financial arrangements (Appendix I)
- Membership Status: Joined: March 24, 1977; Article VIII
- General Resources Account:
  - Quota: 14.20 (SDR Million) 100.00 percent
  - Fund holdings of currency: 14.56 102.50 percent
  - Reserve Position: 0.000 0.00 percent
- SDR Department:
  - Net cumulative allocation: 1.21 (SDR Million) 100.00 percent
  - Holdings: 0.443 36.53 percent
- Outstanding Purchases and Loans (SDR Million; %Quota):
  - First Credit Tranche: 0.36 2.50
  - PRGF Arrangements: 10.20 71.82
- Latest Financial Arrangements — Type, Approval Date, Expiration Date, Amount Approved (SDR Million), Amount Drawn (SDR Million)
  - PRGF: Approval Date Dec 15, 2000; Expiration Dec 14, 2003; Amount Approved 14.20; Amount Drawn 5.08
  - PRGF: Approval Date Jan 18, 1995; Expiration Jul 24, 1998; Amount Approved 10.50; Amount Drawn 10.50
  - SAF: Approval Date Oct 14, 1987; Expiration Oct 13, 1990; Amount Approved 5.25; Amount Drawn 3.75

Projected payments to Fund (SDR Million; based on existing use of resources and present holdings of SDRs) — Forthcoming by year:
- Principal: 2004: 3.61; 2005: 2.12; 2006: 2.59; 2007: 2.17; 2008: 1.25
- Charges/Interest: 2004: 0.09; 2005: 0.06; 2006: 0.05; 2007: 0.04; 2008: 0.03
- Total (per year grouping shown): 3.70; 2.18; 2.64; 2.21; 1.28 (these totals correspond to the grouped rows)

VII. Implementation of HIPC Initiative
- I. Commitment of HIPC assistance
  - Framework Decision point date: Dec 2000
  - Assistance committed by all creditors (US$ Million) 1/: 416.00
  - Of which: IMF assistance (US$ million): 11.91
  - (SDR equivalent in millions): 9.20
  - Completion point date: Floating
- II. Disbursement of IMF assistance (SDR Million)
  - Assistance disbursed to the member: 0.54
    - Interim assistance: 0.54
    - Completion point balance: --
  - Additional disbursement of interest income 2/: --
  - Total disbursements: 0.54

Footnotes from source:
- 1/ Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts can not be added.
- 2/ Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

Definitions provided in the source:
- Decision point — point at which the IMF and the World Bank determine whether a country qualifies for assistance under the HIPC Initiative and decide on the amount of assistance to be committed.
- Interim assistance — amount disbursed to a country during the period between decision and completion points, up to 20 percent annually and 60 percent in total of the assistance committed at the decision point (or 25 percent and 75 percent, respectively, in exceptional circumstances).
- Completion point — point at which a country receives the remaining balance of its assistance committed at the decision point, together with an additional disbursement of interest income as defined in footnote 2 above. The timing of the completion point is linked to the implementation of pre-agreed key structural reforms (i.e., floating completion point).

VIII. Safeguards Assessments
- The BCEAO is subject to a full safeguards assessment.
- An off-site safeguards assessment of the BCEAO was completed on July 25, 2001. The assessment concluded that high risks may exist in the financial reporting framework and recommended an on-site assessment.
- An on-site safeguards assessment of the BCEAO was completed on March 5, 2002.
- BCEAO authorities and Fund staff have reached an understanding regarding the implementation of key recommendations related to financial reporting and internal control.

IX. Exchange System and Exchange Rate Arrangement
- Guinea-Bissau accepted the obligations of Article VIII, Sections 2, 3, and 4 with effect from January 1, 1997.
- Guinea-Bissau joined the West African Economic and Monetary Union (WAEMU) in 1997.
- Starting on January 1, 1999, the CFA franc has been pegged to the euro at a fixed rate of EUR 1 = CFAF 655.95.
- On October 29, 2004, the rate of the CFA franc in terms of the SDR was CFAF 768.49 = SDR 1.

X. Article IV Consultation
- Guinea-Bissau is on the standard 12-month consultation cycle.
- The last Article IV consultation discussions with Guinea-Bissau were held in Bissau during March 7-20, 2002.
- The staff report (IMF Country Report No. 02/153) was discussed by the Executive Board on July 24, 2002.
- A statistical annex (IMF Country Report No. 02/152) was also circulated to the Board.

### Technical assistance and resident representation (Appendix I excerpts)
- Selected technical assistance deliveries (department, type, time period, purpose) include:
  - MAE Expert, March 20–July 23, 1994: Assisting in banking supervision
  - MAE Expert, June 6, 1994–January 26, 1997: Assisting in monetary policy
  - MAE Expert, June–December 1995: Advising on bank accounting
  - STA Staff, March 4–15, 1996: Assessing the quality of monetary, balance of payments, and government statistics
  - FAD Staff, September 8–24, 1996: Advising on tax administration and tax policy
  - FAD Staff, March 9–25, 1997: Advising on import tariff reform and the design of a general sales tax (GST)
  - MAE Expert, June–September 1997 (three short-term missions): Assisting in the transformation of the central bank into a branch of the Central Bank of West African States (BCEAO)
  - Multiple FAD missions through 2001–2003 on tax administration and public expenditure management
  - STA Experts in 2003 on GDDS—Real Sector Statistics and GDDS—Fiscal Statistics
  - WEST AFRITAC experts from November 2003 to June 2004 on Public Expenditure Management; Tax Administration; Customs Administration; Budget Preparation and Execution

- Resident Representative:
  - The post of resident representative was opened in September 1997 and is covered by the Resident Representative in Senegal, Mr. Ousmane Doré.

---

### World Bank Group relations and program highlights (Appendix II)
- As of August 18, 2004, IDA had approved 28 credits for Guinea-Bissau.
  - Sectoral breakdown: eight in transport and infrastructure; three in energy; three for management capability (TA/Economic Management); two for financing urgently needed imports; one in agriculture; three in health; two in education; one social sector; three for structural adjustment; one for economic rehabilitation and recovery; one for private sector rehabilitation and development.
  - Total value of projects: about US$277.2 million equivalent, of which US$242.8 million has been disbursed.
  - As of end-July 2004, the undisbursed balance was US$59.0 million.

- Structural adjustment credits:
  - IDA approved a total of US$63.4 million for structural adjustment operations (two SACs, one supplementary SAC, one ERRC).
  - Parallel financing sources and amounts are listed (e.g., Switzerland US$5.3 million equivalent; African Development Fund US$23.3 million equivalent; Netherlands US$7.5 million equivalent; USAID US$4.5 million; etc.).

- FY2005 pipeline and assistance:
  - For FY2005, IDA approved an HIV/AIDS project and had a Coastal and Biodiversity Management Project in the pipeline. IDA proposed support for an energy and water project during FY2005.
  - The World Bank is assisting with the HIPC Initiative. An Interim Support Strategy (ISS) is being prepared and planned for FY2005.
  - Nonlending program items: Public Expenditure Review (PER) in 2003; participation with IMF in Emergency Economic Management Program (EEMP) toward end-2003; planned Poverty Assessment (PA) and Country Financial Accountability Assessment (CFAA) in FY05; planned Development Policy Review (DPR) and Country Procurement Assessment Review (CPAR) in FY06.

- IFC portfolio (as of June 30, 2004):
  - Two investments: agribusiness (US$0.25 million), financial sector (US$0.28 million to Banco da África). Both loans fully disbursed.
  - Total portfolio held/disbursed: 0.28 (loan) disbursed.

- IDA portfolio numeric summary:
  - Total Disbursed (Active) 28.69
  - Total Disbursed (Closed) 248.51
  - Total Disbursed (Active + Closed) 277.19
  - Total Undisbursed (Active) 34.84
  - Active Projects listed with Project ID, Project Name, Fiscal Year, IDA, Undisb. — examples:
    - P001015 Basic Education 1997: 14.3 IDA; 2.4 Undisb.
    - P073442 GW-HIV/AIDS Global Mitigation Support 2004: 7.0 IDA; 6.8 Undisb.
    - P035688 National Health Dev. Prog. 1998: 11.7 IDA; 3.3 Undisb.
    - P001001 Privat Sector Rehab. & Develop. Project 2002: 26.0 IDA; 22.3 Undisb.

---

### Statistical issues (Appendix III)
- Prior to the 1998-99 civil war, Guinea-Bissau’s statistical database was comprehensive, but significant weaknesses remained, particularly in national accounts, the consumer price index (CPI), and the balance of payments.
- During the war, much of the country's computer equipment was severely damaged, and many key technicians left the country; as a result, data collection was severely impaired, except for trade data and consumer prices.
- In early 1999, the authorities made a determined effort to reestablish their data capacities and were able to recover most information related to production, government finances, and monetary and balance of payments developments.
- This recovery was carried out with assistance from various institutions, including UN agencies and the World Bank, which provided equipment and data.

*Source: IMF staff report content extracted from the provided PDF content unit.*

### 2. Guinea-Bissau is a participant in the General Data Dissemination System (GDDS). Its

### 2. Guinea-Bissau is a participant in the General Data Dissemination System (GDDS).

### Outstanding statistical issues
- GDDS metadata posted on the Fund’s Dissemination Standards Bulletin Board since November 2001.
- International Financial Statistics (IFS) country page introduced in March 1994.
- Exchange rates and monetary data: reported in a timely manner.
- External trade and fiscal sector statistics: not reported to STA for publication in the IFS since 1997.
- Annual national accounts:
  - Current price data reported up to 2002.
  - Constant price GDP estimates: "seriously out of date."

### The authorities’ stance on statistical matters
- Authorities are aware of database shortcomings.
- Authorities receptive to staff recommendations and committed to making basic national statistics publicly available.

### National accounts
- Major hurdle: inadequate data sources for national accounts.
- GDP aggregate largely based on crude assumptions and coefficients from the 1986 benchmark-year estimates.
- INEC (National Statistics Institute) severely affected by armed conflict and requires substantial technical assistance to rebuild capacity to compile production statistics.
- Implementation of recommendations from the STA/GDDS mission of March 2003 recommended to rebuild national accounts to a standard adequate for real sector analysis.

### Consumer prices
- Since July 2002, a harmonized CPI compiled based on the same structure as in other WAEMU countries.
- Price data collection limited to the capital, Bissau.

### Government finance
- Most recent annual data in the Government Finance Statistics Yearbook (GFSY) are for 1989.
- Between 2000-02: substantial progress preparing timely reports on monthly and quarterly budget executions; these were widely circulated nationally.
- Reporting of fiscal data stopped since early 2003; quarterly reports no longer submitted for publication in IFS.
- March 1996 STA mission suggested adjustments to fiscal data for IFS and GFSY publication; armed conflict caused setbacks.
- Technical assistance requested from donors to address shortcomings.
- Since 2002: French government provided two experts to the Ministry of Economy and Finance (MEF) — one on expenditure (vacant since January 2004) and one providing IT support. The EU also financed several experts.
- March–April 2003: two IMF Fiscal Affairs Department missions (revenue administration and expenditure management) made recommendations; a regional GDDS mission made recommendations on improving fiscal data.
- Feb–Mar 2004: two West AFRITAC experts began implementing April 2003 revenue administration recommendations, including setting up a Unit for monitoring large enterprises in the Domestic Tax Department (MEF) and customs administration assistance.
- Nov 2003: AFR mission assisted with preparing an Emergency Economic Management Plan, emergency budget, and a treasury cash plan for 2004.
- Jan and Mar 2004: two AFR missions provided further assistance implementing, updating, and monitoring the cash flow plan.

### Monetary accounts
- Since entry into WAEMU on May 1, 1997, BCEAO compiles and reports monetary data for Guinea-Bissau to STA.
- Guinea-Bissau adopted BCEAO accounting and reporting procedures for monetary and financial statistics.
- Monthly monetary statistics reported regularly for IFS publication, although with some delays; data through May 2004 published in the September 2004 IFS issue.
- Accuracy affected by large cross-border currency movements among BCEAO member countries and recording delays of up to two years.
- May 2001 monetary and financial statistics mission to BCEAO headquarters provided technical assistance; action plan agreed for implementing the Monetary and Financial Statistics Manual (MFSM) and introducing an area-wide IFS page for WAEMU (introduced January 2003).
- Apr 22-25, 2003: BCEAO regional seminar on monetary and financial statistics; working group established to follow up on MFSM implementation.

### Balance of payments
- Trade data reported to AFR for operational purposes using customs information.
- Balance of payments data weak due to substantial nonregistered trade and inconsistencies between BCEAO-reported net foreign assets and other economic indicators.
- Data on workers’ remittances and official transfers: available and reliable.
- Authorities requested Fund technical assistance to improve balance of payments statistics.
- Aug 2004: AFRISTAT balance of payments expert visited Bissau to assess priority needs and assist in preparing a work plan for improving balance of payments and international investment position statistics.

### External debt
- Civil war severely damaged the computer system processing debt data; no progress rehabilitating it.
- Debt data have not been compiled since mid-1998.
- Current external debt database basis: the 2000 debt sustainability analysis; it is excel-based and a more sophisticated system is required for day-to-day debt management.
- Debt Division of the Ministry of Finance faces serious technical and material capacity constraints.

### Recent technical assistance in statistics
- Mar 2003: STA/AFRISTAT technical assistance mission assessed GDDS implementation progress and identified areas for further assistance to improve national accounts.
- Mission proposed a two-faceted approach with short-term and medium-term projects.
  - Short-term proposals:
    - (i) carry out a general population census (2002);
    - (ii) establish an index of industrial production;
    - (iii) establish a price index based on the WAEMU harmonized index;
    - (iv) create an internet site for INEC for data dissemination.
  - Medium-term recommendation:
    - Adoption of the Systems of National Accounts (1993).
- Technical assistance recommendations:
  - Short term: assistance to build capacity for implementing various projects.
  - Medium term: assistance in personnel formation for establishing SNA 1993 and acquisition of material and IT needs.

### Progress toward meeting non-macroeconomic HIPC conditions
- PRSP requirement (prepare full PRSP and implement for at least one year):
  - Status: Preparation delayed by unstable political situation and need for new household budget survey. First draft PRSP with 2002 poverty survey results finalized April 2003; second draft presented March 2004. Macroeconomic framework and costings still need finalization. Limited institutional anchorage and limited input from civil society and government; comprehensive consultation not completed.
- Governance requirements (strengthen public expenditure management; procurement reform; submit and act on external audit of 1997-99 budgets):
  - Status: Audit of 1997-99 budgets finalized. Substantial procurement reform progress after civil war, but public expenditure management deteriorated significantly through 2003. Regular reporting and monitoring stopped. Procurement system needs rebuilding.
- Social sectors and structural reforms (education, health, vaccination, malaria, HIV/AIDS awareness targets):
  - Status:
    - Gross enrolment rate in primary education estimated at 90 percent (goal was 61 percent), attributed to elimination of tuition fees in primary education in 2002.
    - Implementation of basic education plan uneven: classroom construction and textbook distribution progressed; teacher training and capacity building lagged.
    - Multiple Indicators Cluster Survey: only 11.4 percent of children under one year are fully vaccinated.
    - World Bank support to NHDP focuses on basic service delivery programs.
    - Strategic framework for HIV/AIDS under preparation.
    - Latest data show only 12 percent of 15-49 years old women are aware of HIV/AIDS prevention methods.
- Demobilization program (complete demobilization of 5,000 soldiers and reinsertion):
  - Status:
    - Audit completed in 2001; demobilization of 4,392 soldiers finalized mid-September 2002.
    - Reinsertion preparations delayed by donor disbursement suspensions.
    - 2003: World Bank disbursed CFAF 2.3 billion (including CFAF 800 million restructuring), and in February 2004 disbursed remaining tranche of CFAF 3.6 billion under the program.

### Public debt sustainability framework — key baseline figures (2000–2023, selected items)
- Public sector debt (1/): 383.1 (2000); 435.2 (2001); 415.9 (2002); 381.4 (2003); 429.0 (2004); 389.3 (2005); 348.7 (2006); 313.8 (2007); 282.2 (2008); 200.8 (2013); 114.0 (2023).
- o/w foreign-currency denominated: 363.2 (2000); 410.7 (2001); 385.4 (2002); 342.9 (2003); 335.8 (2004); 303.1 (2005); 269.9 (2006); 242.1 (2007); 217.2 (2008); 161.5 (2013); 100.3 (2023).
- Change in public sector debt: 16.6 (2000); 52.0 (2001); -19.2 (2002); -34.6 (2003); 47.6 (2004); -39.7 (2005); -40.6 (2006); -34.9 (2007); -31.6 (2008); -12.1 (2013); -6.5 (2023).
- Identified debt-creating flows: -94.8 (2000); 22.4 (2001); -62.2 (2002); -59.6 (2003); -11.3 (2004); -24.0 (2005); -34.9 (2006); -31.2 (2007); -29.0 (2008); -16.5 (2013); -7.7 (2023).
- Primary deficit: 5.0 (2000); 2.2 (2001); 7.3 (2002); 9.5 (2003); 8.8 (2004); 9.6 (2005); 5.3 (2006); 4.2 (2007); 3.5 (2008); 3.1 (2013); 3.4 (2023).
- Revenue and grants: 33.3 (2000); 31.3 (2001); 21.4 (2002); 23.2 (2003); 33.5 (2004); 23.9 (2005); 25.2 (2006); 25.7 (2007); 25.7 (2008); 25.6 (2013); 25.6 (2023).
  - of which: grants: 14.1 (2000); 14.5 (2001); 6.1 (2002); 7.6 (2003); 15.6 (2004); 8.5 (2005); 8.5 (2006); 8.5 (2007); 8.5 (2008); 8.5 (2013); 8.5 (2023).
- Primary (noninterest) expenditure: 38.4 (2000); 33.5 (2001); 28.6 (2002); 32.8 (2003); 42.2 (2004); 33.5 (2005); 30.6 (2006); 29.9 (2007); 29.2 (2008); 28.7 (2013); 29.1 (2023).
- Automatic debt dynamics: -3.9 (2000); 49.9 (2001); -51.3 (2002); -53.4 (2003); -3.6 (2004); -19.3 (2005); -25.1 (2006); -20.7 (2007); -19.7 (2008); -13.3 (2013); -7.2 (2023).
- Contribution from interest rate/growth differential: -26.8 (2000); -0.3 (2001); 32.1 (2002); -2.8 (2003); -7.4 (2004); -18.8 (2005); -19.9 (2006); -18.5 (2007); -17.6 (2008); -11.9 (2013); -6.3 (2023).
  - of which: contribution from average real interest rate: -1.2 (2000); 0.5 (2001); -1.5 (2002); -0.2 (2003); -1.2 (2004); -4.7 (2005); -5.5 (2006); -5.1 (2007); -4.7 (2008); -2.7 (2013); -1.1 (2023).
  - of which: contribution from real GDP growth: -25.6 (2000); -0.8 (2001); 33.6 (2002); -2.6 (2003); -6.2 (2004); -14.2 (2005); -14.4 (2006); -13.3 (2007); -12.9 (2008); -9.2 (2013); -5.2 (2023).
- Contribution from real exchange rate depreciation: 22.9 (2000); 50.2 (2001); -83.4 (2002); -50.6 (2003); 3.9 (2004); -0.5 (2005); -5.2 (2006); -2.3 (2007); -2.1 (2008).
- Other (identified) debt-creating flows: -95.9 (2000); -29.7 (2001); -18.2 (2002); -15.7 (2003); -16.5 (2004); -14.4 (2005); -15.1 (2006); -14.7 (2007); -12.8 (2008); -6.4 (2013); -3.9 (2023).
- Debt relief (HIPC and other): -87.7 (2000); -17.8 (2001); -5.1 (2002); -3.8 (2003); -3.6 (2004); -3.7 (2005); -4.1 (2006); -4.1 (2007); -3.7 (2008); 0.0 (2013); 0.0 (2023).
- Residual, including asset changes: 111.4 (2000); 29.6 (2001); 43.0 (2002); 25.0 (2003); 58.9 (2004); -15.7 (2005); -5.7 (2006); -3.7 (2007); -2.6 (2008); 4.4 (2013); 1.2 (2023).
- NPV of public sector debt: 304.5 (2000); 346.3 (2001); 332.5 (2002); 307.2 (2003); 356.3 (2004); 323.7 (2005); 290.2 (2006); 261.4 (2007); 235.2 (2008); 165.8 (2013); 92.3 (2023).
  - o/w foreign-currency denominated: 284.6 (2000); 321.8 (2001); 302.0 (2002); 268.6 (2003); 263.1 (2004); 237.5 (2005); 211.5 (2006); 189.7 (2007); 170.2 (2008); 126.5 (2013); 78.6 (2023).
- Gross financing need 2/: 10.8 (2000); 10.2 (2001); 11.5 (2002); 13.8 (2003); 16.4 (2004); 12.2 (2005); 8.1 (2006); 6.6 (2007); 5.6 (2008); 4.7 (2013); 4.7 (2023).
- NPV of public sector debt-to-revenue ratio (in percent) 3/: 913.5 (2000); 1106.9 (2001); 1554.4 (2002); 1322.5 (2003); 1064.6 (2004); 1356.7 (2005); 1150.4 (2006); 1018.5 (2007); 916.5 (2008); 647.0 (2013); 360.1 (2023).
  - o/w external: 853.7 (2000); 1028.6 (2001); 1411.8 (2002); 1156.6 (2003); 786.0 (2004); 995.3 (2005); 838.2 (2006); 739.1 (2007); 663.2 (2008); 493.7 (2013); 306.6 (2023).
- Debt service-to-revenue ratio (in percent) 3/4/: 17.2 (2000); 25.5 (2001); 20.1 (2002); 18.5 (2003); 11.8 (2004); 10.6 (2005); 11.1 (2006); 9.3 (2007); 8.0 (2008); 6.2 (2013); 4.9 (2023).
- Primary deficit that stabilizes the debt-to-GDP ratio: -11.5 (2000); -49.8 (2001); 26.5 (2002); 44.1 (2003); -38.9 (2004); 49.4 (2005); 46.0 (2006); 39.1 (2007); 35.1 (2008); 15.2 (2013); 9.9 (2023).

### Key macroeconomic and fiscal assumptions (selected)
- Real GDP growth (in percent): 7.5 (2000); 0.2 (2001); -7.2 (2002); 0.6 (2003); 1.7 (2004); 3.4 (2005); 3.8 (2006); 4.0 (2007); 4.3 (2008); 4.5 (2013); 4.5 (2023).
- Average nominal interest rate on forex debt (in percent): 1.7 (2000); 2.1 (2001); 1.0 (2002); 1.1 (2003); 0.9 (2004); 0.6 (2005); 1.2 (2006); 0.9 (2007); 1.1 (2008); 1.0 (2013); 1.2 (2023).
- Inflation rate (GDP deflator, in percent): 3.2 (2000); -5.1 (2001); 4.8 (2002); -2.9 (2003); 3.3 (2004); 2.0 (2005); 3.0 (2006); 3.0 (2007); 3.0 (2008); 2.9 (2013); 2.9 (2023).
- Growth of real primary spending (deflated by GDP deflator, in percent): 65.3 (2000); -12.5 (2001); -20.7 (2002); 15.1 (2003); 31.0 (2004); -18.0 (2005); -5.2 (2006); 1.7 (2007); 1.9 (2008); 4.6 (2013); 4.6 (2023).
- Grant element of new external borrowing (in percent): 0.6 (2000); 0.6 (2001); 0.6 (2002); 0.6 (2003); 0.6 (2004); 0.6 (2005); 0.6 (2006); 0.6 (2007); 0.6 (2008); 0.6 (2013); 0.6 (2023).

*Source: IMF staff report content provided in the supplied PDF extract.*

### APPENDIX                                                                    V

### _cr0569 - APPENDIX V

### Political situation and recent events
- Political situation remained fragile after the recent military mutiny; no further incidents since early October (statement dated November 19, 2004).
- Soldiers’ main demand—the second payment for peace-keeping duty in Liberia—was met.
- Recent nominations to top posts in the Armed Forces included officers who acted as spokesmen for the mutineers, raising doubts about distribution of political power between the Armed Forces and the government.
- The Economic Community of West African States (ECOWAS) and the Community of Portuguese Speaking Countries (CPLP) established permanent representations in Bissau to support intermediation efforts; CPLP supports efforts to identify the need for military reform.

### Fiscal developments, wage revisions, and public administration
- Revisions in public sector wage scales in recent months estimated to have resulted in an almost doubling of base wages, partly offset by eliminating non-wage benefits.
- Authorities agreed to raise civil service salaries by an average of 67 percent and military wages by an average of 200 percent (bringing them broadly in line with similar positions in the civil service).
- Preliminary estimates of the net effect, including offsetting measures, indicate personnel costs would be more than 3 percent of GDP (€ 7.5 million) higher in 2005 than in 2004.
- Expenditure control measures: emphasis on restoring rule-based fiscal management; recommendation to rapidly follow up on the civil service census to remove ghost workers from payroll.
- Authorities committed to paying government salaries on time and to pay electricity bills monthly to allow administration to restart basic operations.
- Measures taken to improve financial management: centralizing all revenue in the treasury account at the BCEAO; applying public procurement regulations; replacing political appointees with experienced technicians at head of revenue departments.
- Authorities agreed to conduct a civil servant survey to help contain the wage bill and to harmonize salaries across the public sector.

### Economic performance, outlook, and structural reforms
- Recent performance: Real GDP declined by 7 percent in 2002 and was flat in 2003; real GDP estimated to increase by 1-2 percent in 2004 and by around 3 percent in 2005 (authorities’ estimates).
- Inflation: expected to remain within WAEMU’s target of less than 3 percent by end of 2004.
- External current account: in 2003, external current account deficit excluding official transfers halved to 6.7 percent of GDP. Reflecting low imports in the first half of 2004, external current account balance including official transfers projected to become slightly positive in 2004.
- Terms of trade deteriorated slightly (by 1.5 percent) in 2003, mainly due to higher import prices for petroleum products.
- Real effective exchange rate depreciated slightly due to low domestic inflation.
- Structural reform priorities: rapid deregulation of the economy; improve investment code and legal system; pursue privatization program; rebuild banking system; reduce inefficient taxes and regulations; revitalize private sector; prepare and implement comprehensive public sector reform program.
- Financial sector: WAEMU decision relaxing the capital requirement for Guinea-Bissau expected to facilitate creation of new banks, including microfinance institutions.
- Authorities’ medium-term objectives: accelerating economic growth, reducing poverty, stabilizing fiscal situation.
- Authorities plan to finalize PRSP based on broad domestic consultation; stress prioritization and costing of poverty programs.

### Debt, aid, and international assistance
- Guinea-Bissau remains one of the most heavily indebted countries in the world.
- Interim debt relief under the HIPC Initiative was halted by most creditors after the PRGF-supported program went off-track; African Development Bank and the World Bank continue to provide interim debt relief.
- No arrears to the IMF, but debt service to most bilateral creditors continues to fall in arrears.
- Directors urged caution in further borrowing and increased emphasis on the use of grant financing.
- Resolution of external debt service arrears requires resumption of debt relief under the enhanced HIPC Initiative; Directors urged authorities to engage creditors to seek interim solutions.
- Directors and Executive Board assessment: Fund should remain engaged; next step could be emergency post-conflict assistance as part of a concerted international effort. Some Directors suggested consideration of concessional PRGF possibly preceded by a Staff-Monitored Program.
- Emphasis on technical and financial assistance from international community; need for institution and capacity building, including fiscal management and macroeconomic statistics; preparation of a country-wide technical assistance plan urged.

### IMF Executive Board key messages and recommendations
- Welcomed the new government’s economic program for 2004-08 as a good basis to restore fiscal discipline and pursue structural reforms to boost growth and reduce poverty.
- Emphasized restoring fiscal discipline, rebuilding public administration, improving climate for private investment and economic diversification.
- Urged expenditure control, re-orientation of expenditure to priority areas, and finding additional resources while reducing nonessential expenditure.
- Highlighted importance of strengthening revenue administration and broadening tax base.
- Stressed rapid deregulation and other structural reforms to strengthen external competitiveness within WAEMU fixed exchange rate system.
- Urged implementation of governance-related reforms and broad domestic consultation for PRSP.
- Encouraged authorities to build strong track record on program implementation to secure renewed international assistance.

### Selected economic indicators (as reported)
- Per capita income: US$185.
- Real GDP at market prices (annual percent change): 1999: 7.6; 2000: 7.5; 2001: 0.2; 2002: -7.2; 2003: 0.6.
- Consumer price index (annual percent change): 1999: -2.1; 2000: 8.6; 2001: 3.3; 2002: 3.3; 2003: ... .
- Budget: revenue (in percent of GDP): 1999: 17.3; 2000: 19.2; 2001: 16.8; 2002: 15.3; 2003: 15.6.
- Budget: total domestic primary expenditure (in percent of GDP): 1999: 30.5; 2000: 38.4; 2001: 34.6; 2002: 28.6; 2003: 32.4.
- Budget: domestic primary balance (in percent of GDP): 1999: -8.4; 2000: -11.1; 2001: -4.7; 2002: -4.2; 2003: -4.3.
- Budget: overall balance (commitment basis) excluding grants (in percent of GDP): 1999: -14.0; 2000: -24.9; 2001: -26.2; 2002: -18.1; 2003: -21.6.
- External current account excluding official current transfers (in percent of GDP): 1999: -24.2; 2000: -16.5; 2001: -28.9; 2002: -12.9; 2003: -6.7.

_Excerpted from the IMF Staff Report and associated documents for the 2004 Article IV Consultation with Guinea-Bissau (statements dated November 19, 2004; Public Information Notice No. 04/138, December 10, 2004)._

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr0569.pdf_