## Joint Staff Advisory Note (JSAN) on Guinea‑Bissau’s Second National Poverty Reduction Strategy Paper (PRSP II) 2011–2015

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---

### Overview
- Reviews PRSP II covering the period 2011–2015.
- PRSP II adopted by the government in July 2011 as framework to:
  - consolidate macroeconomic stabilization,
  - strengthen recent improvements in economic governance,
  - enhance economic growth conditions,
  - strengthen the rule of law,
  - accelerate progress toward the Millennium Development Goals (MDGs).

### Preparation and participation
- Prepared in a participatory manner with extensive national and regional consultations involving government agencies, civil society, the private sector, national institutions and cooperating partners.
- The PRSP II describes the participatory process but does not clearly specify how stakeholder feedback was incorporated into the emerging strategy.
- Staff recommendation:
  - incorporate information on how stakeholder feedback was addressed into the general publication of the document.

### Analytical basis and supporting studies
- PRSP II grounded in major statistical surveys and studies:
  - National Population Census (RGPH) of 2009
  - Multiple-Indicators Clusters Survey (MICS) of 2010
  - second Light Poverty Assessment Household Survey (ILAP II) of 2010
  - Sources of Growth Study (2010)
  - Assessment of Non-Monetary Poverty (2010)
  - Cost Estimate for Achieving the MDGs (2011)
- Preparation also referred to government public-sector strategy documents: Policy Letter for the Education Sector (CPSE), Health and Sanitation Development Plan (PNDS), Water and Sanitation Master Plan (PDAS), National Program for Agricultural Investment (PNIA), and National Strategy for Gender (to be finalized in late-2011).

### Objectives, structure and cross‑cutting themes
- Core objectives:
  - significantly reduce poverty,
  - create and expand income-generation opportunities,
  - improve access to public services within strengthened public institutions and enhanced rule of law.
- Four pillars:
  1. Strengthening the rule of law and improving efficacy of public administration
  2. Guaranteeing macroeconomic stability, consolidating public financial management reforms and fostering private-sector development
  3. Promoting sustainable, broad-based economic growth
  4. Enhancing human development
- Cross-cutting objectives: gender equality (especially access to education and health services), protection of vulnerable groups, environmental sustainability.
- Staffs note strong consistency between PRSP II objectives and structure and the World Bank’s Africa Regional Strategy.

### MDGs linkage and cost requirements
- PRSP II explicitly links strategy to key MDG outcomes and reaffirms commitment to prioritizing MDG-related programs despite recognizing most MDGs are unlikely to be achieved by 2015.
- Staffs concur with government’s estimate of the MDG’s cost requirements and welcome the forthcoming Prioritized Action Plan (PAP) for accelerating MDG progress.
- Cost-estimate finding:
  - to achieve the MDGs, the government should triple the resources allocated in 2008 to the education, health, agriculture, energy and infrastructure sectors.
- Staffs note that reaching this goal would require substantially enhanced implementation capacity among government agencies.

### Poverty trends 2002–10 (findings)
- Poverty worsened over the past decade:
  - Poverty rate increased from 64.7 percent in 2002 to 69.3 percent in 2010.
  - Extreme poverty rate rose from 20.8 percent in 2002 to 33.0 percent in 2010.
- Causes identified: continuous political instability, poor economic policy record of previous administrations, weak income-growth performance exacerbated by food and fuel price increases and the global economic downturn in 2008–09.
- Non-monetary poverty profile (RGPH results):
  - Non-monetary poverty affects 40 percent of the population.
  - Urban non-monetary poverty: 8 percent.
  - Rural non-monetary poverty: 60 percent.
- Human development indicators (MICS 2010) showed some improvement between 2006 and 2010:
  - Total infant mortality: 124 deaths per 1000 births in 2000; 138 in 2006; 104 in 2010.
  - School enrollment rates: 42 percent in 2000; 45 percent in 2006; 65 percent in 2010.
  - Ratio of girls’ to boys’ primary-school enrollment: 0.67 in 2002; 0.83 in 2006; 0.94 in 2010.
- Conclusion: despite improvements, Guinea-Bissau is not expected to achieve the MDGs by 2015.

### Pillar 1 — Strengthening the rule of law and public administration
- Internal security (defense and security sector reform; combating drug trafficking and illegal arms trade)
  - Staffs support prioritizing internal stability and efficiency and openness in public administration.
  - Reform of the Defense and Security Sector (RDSS) is fundamental to political stability and democratic integrity.
  - PRSP II recognizes limited progress to date and proposes a revised and expanded RDSS strategy addressing military–civilian conflicts.
  - Key elements: establishment of financial assistance mechanisms in RDSS, including a pension system to downsize and modernize security forces.
  - Staffs support a two-tiered strategy for combating drug trafficking and illegal arms trade: national enforcement plus regional and international cooperation.
- The rule of law (public administration reform, judicial normalization, constitutional adherence)
  - PRSP II candidly assesses systemic governance failures rooted in lack of administrative capacity and abuse of political power.
  - Staffs view judicial system reforms, legal authority exercise, and public administration reform as most critical, and recommend sequencing reforms to support RDSS as the top political priority.
  - Implementation risks are substantial and require strong government effort.

### Pillar 2 — Macroeconomic stability, PFM reforms and private‑sector development
- Macroeconomic framework
  - PRSP II aligns broadly with the Extended Credit Facility (ECF)-supported program.
  - Authorities commit to achieve an average annual GDP growth of 5 percent within the period 2011–2015.
  - Emphasis on enhancing revenue mobilization, consolidating public financial management reforms, diversifying production and export base to reduce vulnerability to external shocks.
  - Staffs regard growth objectives as achievable but advise attention to downside risks, especially adverse external conditions and exogenous shocks, including a probable worsening of the global economic crisis affecting exports, economic growth and government revenues.
  - Recommendation: maintain budget within available resources.
- Financing and donor coordination
  - Strategy relies on domestic resources and foreign assistance; staff welcome efforts to increase domestic financing.
  - EU support suspended but consultations under Article 96 of the Cotonou Agreement last March produced commitments that could permit EU to resume financial support once implemented.
  - If donor assistance falls short, authorities would need to raise more revenues or contain spending.
  - Staffs underline importance of presenting detailed data on donor activities for coordination and accurate public financial reporting.
  - New external borrowing should remain highly concessional, aligned with IMF-supported program and IDA Non-concessional Borrowing Policy, to maintain low debt vulnerabilities.
- Public finance reform (PFM)
  - Since 2009, government implementing a priority action plan for PFM: new institutional framework, IT systems for expenditure management, new budgetary classification, complementary legislation.
  - Integrated System for Public Financial Management (SIGFIP) now in full operation using budget preparation, execution and accounting modules.
  - PRSP II aims to update PFM legal framework consistent with WAEMU standards, adopt programmatic budgetary classification, and establish a Medium-Term Expenditure Framework (MTEF) over next two years.
  - Staffs recommend short-term concentration on expenditure management and prioritizing collection of existing revenues while expanding/diversifying tax base longer term.
  - Measures include controlling civil service payroll weight in total expenditures and improving public procurement system.
  - Revenue mobilization emphasis: reforms to customs service and tax administration, expansion of tax collection coverage, centralization of revenue collection under Ministry of Finance, and establishment of a value-added tax system.
- Private‑sector development
  - PRSP II accurately appraises obstacles: difficulty obtaining information to start a business, complex burdensome registration and hiring requirements, excessive number of public agencies involved.
  - Government has simplified business licensing procedures and passed new investment code legislation.
  - Staffs recommend prioritizing reforms that reduce administrative costs (streamlining formal procedures, reducing bureaucratic redundancies) as cost-effective measures.

### Pillar 3 — Promoting sustainable, inclusive and broad‑based economic growth
- Sectoral strategy
  - PRSP II targets cashew and rice production, fisheries and tourism as sectors with high pro-poor growth potential.
  - This assessment aligns with the Diagnostic Trade Integration Study (DTIS) and the Bank’s Country Economic Memorandum (CEM).
  - PRSP II does not explicitly detail specific interventions or potential impacts for these sectors.
  - Recommendation: undertake additional analytical work with technical assistance and review DTIS action matrix priorities endorsed in January 2010.

- Cashew sector: importance, policy change, and recommended assessment
  - Findings:
    - The cashew sector "represents nearly all of the country’s export revenue" and "has strong pro-poor growth potential due to its labor-intensive nature."
    - Raw cashew yields continue to increase.
    - The government enacted a levy on raw cashew exports to be managed with the Chamber of Commerce, Industry, Agriculture and Services (CCIAS). This levy was enacted after the PRSP II was complete and is not included in the strategy.
    - Although "not technically a tax, the levy on the cashew sector has the same economic effect as an export tariff."
    - The levy is expected to reduce farm gate prices paid to producers with a likely negative impact on poverty.
  - Staff recommendations:
    - Conduct a detailed assessment of the levy’s economic and social impact.
    - Promote further dialogue between the government and cooperating partners to assess the appropriateness of the levy relative to PRSP II objectives for the cashew sector.
    - Implement PRSP II policies for the cashew sector taking the levy into account.

- Agriculture policy priorities and constraints
  - PRSP II elements:
    - Greater support for extension services to cashew farmers.
    - Facilitation of access to credit, particularly for processing and related activities.
  - Staff observations on credit access:
    - Access to credit is treated largely as a supply-side problem in PRSP II.
    - Insufficient attention to credit-market dysfunctions, including "the unpredictability of contract enforcement and the absence of systems for recording vital screening information."
  - Rice production:
    - PRSP II emphasizes rice due to its role in food security and potential to improve terms-of-trade and boost rural incomes.
    - Staffs note rice’s potential for reducing income inequality.
    - Staff recommendation: prioritize "the production of irrigated lowland rice," identified as "the most cost-effective modality of rice production and among the least environmentally damaging."

- Fisheries, tourism, and mining
  - Fisheries:
    - PRSP II underlines marine fisheries’ role in promoting growth.
    - Current approach: Guinea-Bissau "rents out" fishery resources to foreign users for public revenue.
    - Staff concerns: resource-management measures are insufficient; fishing revenues "are neither reflective of market values nor sufficient to offset the depletion of natural capital."
    - Staff recommendations:
      - Develop a more effective and remunerative fisheries management system.
      - Seek cooperating partners’ assistance in monitoring and enforcement.
      - Renegotiate rents for bilateral fishing rights.
  - Tourism:
    - Tourism is "a marginal but growing contribution" to the economy.
    - Authorities have committed to biodiversity protection: "14 percent of the country’s land area devoted to national parks."
    - Park services and related agencies are largely underfunded.
    - Staff recommendations:
      - Enhance strategic planning in tourism.
      - Link tourism-industry revenues to environment-agency funding to boost value of natural capital assets.
      - Ensure authorities’ commitment and community engagement to protect natural-resource base.
  - Mining and exhaustible resources:
    - Guinea-Bissau "is known to possess significant mineral deposits, especially phosphates and bauxite," and may hold exploitable oil reserves in territorial waters.
    - PRSP II does not treat exploration and extraction issues in sufficient detail.
    - Staff concerns and recommendations:
      - Present a more comprehensive analysis of sectoral challenges (defining mineral rights, setting tariff rates, tendering contracts, ensuring operational oversight).
      - Assess how rising mineral-product commodity exports may affect other economic sectors.
      - Develop, with cooperating partners, "a much more circumspect and comprehensive policy for the mining and mineral-resource sector."

### Infrastructure: key constraints and sectoral priorities
- Overall assessment: basic infrastructure is in a "dire state" and is a binding constraint on growth.
- PRSP II focuses on energy, seaports, and the road network to improve growth conditions.
- Energy sector findings:
  - Prolonged electricity crisis causing regular blackouts, high operating costs, large losses (including theft via illegal connections), high retail tariffs, low bill collection rates, significant fiscal burden via subsidies, and very high consumer costs for self-generated power.
  - Government plans to promote institutional reforms of the state energy and water utility EAGB are welcomed by staffs.
- Port of Bissau findings:
  - Problems include poor operational performance, high tariffs, decaying infrastructure, and poor corporate governance.
  - PRSP II lacks sufficient detail on how port improvements should be achieved.
  - Staffs: strategy must address both physical investment and institutional needs.
- Roads:
  - Focus on maintenance of the national network and expansion of rural access roads is appropriate.
  - Staff emphasis: integrate policy actions into a strategic framework for the transportation sector.

### Environment and natural resource management
- PRSP II stresses environmental sustainability and improving natural resource management regulations.
- Government has adopted regulations for concession of environmental licenses and requirements for projects using natural resources or generating environmental externalities.
- Staff recommendation:
  - Enhance institutional capacity of natural resource management entities.

### Human development: education, vocational training and health
- Education findings:
  - Enrollment rates have increased, but service quality has degraded as coverage expanded.
  - Gender equality:
    - girls’ enrollment rates for primary and secondary school are "nearing parity" with boys,
    - "female students remain between 1.4 and 2 times less likely to graduate than their male counterparts."
  - Public teaching-staff management problems: chaotic hiring system, effectively no qualifications required, number of teachers hired routinely exceeds the salary budget, leading to arrears and frequent teacher strikes.
  - Staff recommendations:
    - Address personnel management directly, "utilizing similar methods to those employed in the ongoing reform of the public service."
    - Develop a separate action plan for vocational training, consistent with sector-specific economic objectives, since "adult education and vocational training are virtually absent from the PRSP II."
- Health findings:
  - Improvements in health-status indicators during the past decade despite political instability and high poverty.
  - Infant and under-five mortality rates dropped significantly; maternal mortality remains "one of the highest in Africa."
  - Immunizations, antenatal care, and deliveries assisted by a health professional increased due to investments in infrastructure, training, and administrative improvements.
  - HIV/AIDS:
    - Authorities prepared a National Strategic Plan (PEN) for "the period 2011–2013" emphasizing prevention, care and treatment, and multisectoral approach.
    - HIV prevalence in Guinea-Bissau is "relatively low at an estimated at 2.6%, but in some urban areas it now reaches as high as 5.6%."
    - Official information campaigns have raised awareness, though information on preventative measures remains limited.
  - Staff recommendations:
    - Conduct an in-depth analysis of human-resources needs, prospective facility expansion, and financial implications.
    - Consider alternative service-delivery models, including community-based and public outreach interventions.
    - Focus awareness and prevention efforts on areas targeted for rapid economic growth, given rising infection risks linked to increasing economic connectivity.

### Implementation, monitoring and evaluation (M&E)
- Implementation structure:
  - Three levels: (i) steering committee (decision-making, strategic orientations, approving prioritized action plan), (ii) technical committee (coordination and M&E), and (iii) planning and monitoring committees at sector levels (support implementing agencies, collect raw data).
  - Representatives of Guinea-Bissau’s partners included in the steering committee.
  - Staffs find the proposed implementation arrangement "comprehensive and appropriate" but note capacity constraints.
- Budget linkages:
  - Explicit link between PRSP II and the budget cycle is an improvement over NPRSP I.
  - Progress in budget classification, planning and execution expected to allow alignment of budget allocations with PRSP II priorities.
  - Government intends to adopt an MTEF with cooperating partners’ support; staffs encourage a realistic view on timeframe and administrative groundwork required.
- M&E system proposals:
  - Two primary components: (i) continuing assessment of poverty trends and household living conditions coordinated by the National Institute of Statistics (INE); and (ii) monitoring PRSP II implementation coordinated by the National Directorate of Planning (DNP) at the Ministry of Economy, Planning and Regional Integration (MEPIR).
- Staff concerns:
  - Allocation of responsibilities for managing M&E and specificity of objectives for strengthening institutional framework.
  - Lack of sound sector-level statistics could jeopardize M&E functioning.
  - INE designed an action plan under the National Strategy for the Development of Statistics (SNDE) focused on strengthening statistical capacity, but statistical capacity development is absent as an explicit PRSP II priority.
  - Cooperating partners can provide technical assistance but cannot supplant the government's primary role in data collection and analysis.

### Conclusion: implementation risks and priorities
- Overall assessment:
  - PRSP II is "a comprehensive medium-term development strategy" but faces challenges from low technical, financial, institutional and aid-absorption capacities.
  - Political instability is a persistent risk; sustained progress in defense and security sector reforms is a "fundamental prerequisite for political stability."
  - Success depends on prioritized action plans based on reliable estimates of available resources and realistic implementation capacity of government agencies.
  - Improvements in public financial management will aid strategic allocation and expenditure efficiency.
  - As the government intends to increase domestic-revenue mobilization to finance PRSP II, consolidation of budgetary and financial management reforms is "especially crucial."
- Staff request:
  - Executive Directors’ views are sought regarding agreement with main areas identified by staffs as priorities for strengthening strategy and implementation, and areas identified as key implementation risks.

*Source: IMF staff report excerpt (content unit _cr11352).*

### 1.      This Joint Staff Advisory Note (JSAN) reviews Guinea-Bissau’s Second National

### Joint Staff Advisory Note (JSAN) on Guinea-Bissau’s Second National Poverty Reduction Strategy Paper (PRSP II) 2011–2015

### Overview
- The JSAN reviews Guinea-Bissau’s Second National Poverty Reduction Strategy Paper (PRSP II) covering the period 2011–2015.
- PRSP II, adopted by the government in July 2011, provides the framework for implementing a comprehensive strategy aimed at consolidating macroeconomic stabilization, strengthening recent improvements in economic governance, enhancing economic growth conditions, strengthening the rule of law, and accelerating progress toward the Millennium Development Goals (MDGs).

### Preparation and participation
- PRSP II was prepared in a participatory manner with extensive consultations at national and regional levels involving government agencies, civil society, the private sector, national institutions and cooperating partners.
- The PRSP II describes the participatory process, but does not clearly specify how stakeholder feedback was incorporated into the emerging strategy.
- Recommendation: incorporate information on how stakeholder feedback was addressed into the general publication of the document.

### Analytical basis and supporting studies
- PRSP II was grounded in major statistical surveys and studies:
  - National Population Census (RGPH) of 2009
  - Multiple-Indicators Clusters Survey (MICS) of 2010
  - second Light Poverty Assessment Household Survey (ILAP II) of 2010
  - Sources of Growth Study (2010)
  - Assessment of Non-Monetary Poverty (2010)
  - Cost Estimate for Achieving the MDGs (2011)
- The preparation process also referred to government public-sector strategy documents: Policy Letter for the Education Sector (CPSE), Health and Sanitation Development Plan (PNDS), Water and Sanitation Master Plan (PDAS), National Program for Agricultural Investment (PNIA), and National Strategy for Gender (to be finalized in late-2011).

### Objectives, structure and cross-cutting themes
- Core objectives: significantly reduce poverty, create and expand income-generation opportunities, and improve access to public services within strengthened public institutions and enhanced rule of law.
- Four pillars:
  1. Strengthening the rule of law and improving efficacy of public administration
  2. Guaranteeing macroeconomic stability, consolidating public financial management reforms and fostering private-sector development
  3. Promoting sustainable, broad-based economic growth
  4. Enhancing human development
- Cross-cutting objectives: gender equality (especially access to education and health services), protection of vulnerable groups, and environmental sustainability.
- Staffs note strong consistency between PRSP II objectives and structure and the World Bank’s Africa Regional Strategy.

### MDGs linkage and cost requirements
- PRSP II explicitly links strategy to key MDG outcomes and reaffirms commitment to prioritizing MDG-related programs as part of a longer-term effort despite recognizing most MDGs are unlikely to be achieved by 2015.
- Staffs concur with government’s estimate of the MDG’s cost requirements and welcome the forthcoming Prioritized Action Plan (PAP) for accelerating MDG progress.
- Cost estimate finding: to achieve the MDGs, the government should triple the resources allocated in 2008 to the education, health, agriculture, energy and infrastructure sectors.
- Staffs note that reaching this goal would require substantially enhanced implementation capacity among government agencies.

### Poverty trends 2002–10 (findings)
- Based on 2010 ILAP II and other sources, poverty worsened over the past decade:
  - Poverty rate increased from 64.7 percent in 2002 to 69.3 percent in 2010.
  - Extreme poverty rate rose from 20.8 percent in 2002 to 33.0 percent in 2010.
- Causes identified: continuous political instability, poor economic policy record of previous administrations, weak income-growth performance exacerbated by food and fuel price increases and the global economic downturn in 2008–09.
- Non-monetary poverty profile (RGPH results):
  - Non-monetary poverty affects 40 percent of the population.
  - Urban non-monetary poverty: 8 percent.
  - Rural non-monetary poverty: 60 percent.
- Human development indicators (MICS 2010) showed some improvement between 2006 and 2010:
  - Total infant mortality: 124 deaths per 1000 births in 2000; 138 in 2006; 104 in 2010.
  - School enrollment rates: 42 percent in 2000; 45 percent in 2006; 65 percent in 2010.
  - Ratio of girls’ to boys’ primary-school enrollment: 0.67 in 2002; 0.83 in 2006; 0.94 in 2010.
- Conclusion: despite improvements, Guinea-Bissau is not expected to achieve the MDGs by 2015.

### Pillar 1 — Strengthening the rule of law and public administration
- A. Internal security: defense and security sector reform; combating drug trafficking and illegal arms trade
  - Staffs support prioritizing internal stability and efficiency and openness in public administration.
  - Reform of the Defense and Security Sector (RDSS) is fundamental to political stability and democratic integrity.
  - PRSP II recognizes limited progress to date and proposes a revised and expanded RDSS strategy addressing military–civilian conflicts.
  - Key elements: establishment of financial assistance mechanisms in RDSS, including a pension system to downsize and modernize security forces.
  - Staffs support a two-tiered strategy for combating drug trafficking and illegal arms trade: national enforcement plus regional and international cooperation.
- B. The rule of law: public administration reform, judicial normalization, constitutional adherence
  - PRSP II candidly assesses systemic governance failures rooted in lack of administrative capacity and abuse of political power.
  - Staffs view judicial system reforms, legal authority exercise, and public administration reform as most critical, and recommend sequencing reforms to support RDSS as the top political priority.
  - Implementation risks are substantial and require strong government effort.

### Pillar 2 — Macroeconomic stability, PFM reforms and private-sector development
- A. Macroeconomic framework
  - PRSP II aligns broadly with the Extended Credit Facility (ECF)-supported program.
  - Authorities commit to achieve an average annual GDP growth of 5 percent within the period 2011–2015.
  - Emphasis on enhancing revenue mobilization, consolidating public financial management reforms, diversifying production and export base to reduce vulnerability to external shocks.
  - Staffs regard growth objectives as achievable but advise attention to downside risks, especially adverse external conditions and exogenous shocks, including a probable worsening of the global economic crisis affecting exports, economic growth and government revenues.
  - Recommendation: maintain budget within available resources.
- B. Financing and donor coordination
  - Strategy relies on domestic resources and foreign assistance; staff welcome efforts to increase domestic financing.
  - EU support suspended but consultations under Article 96 of the Cotonou Agreement last March produced commitments that could permit EU to resume financial support once implemented.
  - If donor assistance falls short, authorities would need to raise more revenues or contain spending.
  - Staffs underline importance of presenting detailed data on donor activities for coordination and accurate public financial reporting.
  - New external borrowing should remain highly concessional, aligned with IMF-supported program and IDA Non-concessional Borrowing Policy, to maintain low debt vulnerabilities.
- C. Public finance reform (PFM)
  - Since 2009, government implementing a priority action plan for PFM: new institutional framework, IT systems for expenditure management, new budgetary classification, complementary legislation.
  - Integrated System for Public Financial Management (SIGFIP) now in full operation using budget preparation, execution and accounting modules.
  - PRSP II aims to update PFM legal framework consistent with WAEMU standards, adopt programmatic budgetary classification, and establish a Medium-Term Expenditure Framework (MTEF) over next two years.
  - Staffs recommend short-term concentration on expenditure management and prioritizing collection of existing revenues while expanding/diversifying tax base longer term.
  - Measures include controlling civil service payroll weight in total expenditures and improving public procurement system.
  - Revenue mobilization emphasis: reforms to customs service and tax administration, expansion of tax collection coverage, centralization of revenue collection under Ministry of Finance, and establishment of a value-added tax system.
- D. Private-sector development
  - PRSP II accurately appraises obstacles: difficulty obtaining information to start a business, complex burdensome registration and hiring requirements, excessive number of public agencies involved.
  - Government has simplified business licensing procedures and passed new investment code legislation.
  - Staffs recommend prioritizing reforms that reduce administrative costs (streamlining formal procedures, reducing bureaucratic redundancies) as cost-effective measures.

### Pillar 3 — Promoting sustainable, inclusive and broad-based economic growth
- Sectoral strategy
  - PRSP II targets cashew and rice production, fisheries and tourism as sectors with high pro-poor growth potential.
  - This assessment aligns with the Diagnostic Trade Integration Study (DTIS) and the Bank’s Country Economic Memorandum (CEM).
  - PRSP II does not explicitly detail specific interventions or potential impacts for these sectors.
  - Recommendation: undertake additional analytical work with technical assistance and review DTIS action matrix priorities endorsed in January 2010.

*Joint Staff Advisory Note (JSAN) reviewing Guinea-Bissau’s Second National Poverty Reduction Strategy Paper (PRSP II) covering the period 2011–2015.*

### 25.      The cashew sector is enormously important to the Bissau-Guinean economy: it

### _cr11352 - 25.      The cashew sector is enormously important to the Bissau-Guinean economy: it

### Cashew sector: importance, policy change, and recommended assessment
- Findings:
  - The cashew sector "represents nearly all of the country’s export revenue" and "has strong pro-poor growth potential due to its labor-intensive nature."
  - Raw cashew yields continue to increase.
  - The government enacted a levy on raw cashew exports to be managed with the Chamber of Commerce, Industry, Agriculture and Services (CCIAS). This levy was enacted after the PRSP II was complete and is not included in the strategy.
  - Although "not technically a tax, the levy on the cashew sector has the same economic effect as an export tariff."
  - The levy is expected to reduce farm gate prices paid to producers with a likely negative impact on poverty.
- Staff recommendations:
  - Conduct a detailed assessment of the levy’s economic and social impact.
  - Promote further dialogue between the government and cooperating partners to assess the appropriateness of the levy relative to PRSP II objectives for the cashew sector.
  - Implement PRSP II policies for the cashew sector taking the levy into account.

### Agriculture policy priorities and constraints
- PRSP II strategy elements:
  - Greater support for extension services to cashew farmers.
  - Facilitation of access to credit, particularly for processing and related activities.
- Staff observations on credit access:
  - Access to credit is treated largely as a supply-side problem in PRSP II.
  - Insufficient attention to credit-market dysfunctions, including "the unpredictability of contract enforcement and the absence of systems for recording vital screening information."
- Rice production:
  - PRSP II emphasizes rice due to its role in food security and potential to improve terms-of-trade and boost rural incomes.
  - Staffs agree and note rice’s potential for reducing income inequality.
  - Staff recommendation: prioritize "the production of irrigated lowland rice," identified as "the most cost-effective modality of rice production and among the least environmentally damaging."

### Fisheries, tourism, and mining: opportunities and management needs
- Fisheries:
  - PRSP II underlines marine fisheries’ role in promoting growth.
  - Current approach: Guinea-Bissau "rents out" fishery resources to foreign users for public revenue.
  - Staff concerns: resource-management measures are insufficient; fishing revenues "are neither reflective of market values nor sufficient to offset the depletion of natural capital."
  - Staff recommendations:
    - Develop a more effective and remunerative fisheries management system.
    - Seek cooperating partners’ assistance in monitoring and enforcement.
    - Renegotiate rents for bilateral fishing rights.
- Tourism:
  - Tourism is "a marginal but growing contribution" to the economy.
  - Authorities have committed to biodiversity protection: "14 percent of the country’s land area devoted to national parks."
  - Park services and related agencies are largely underfunded.
  - Staff recommendations:
    - Enhance strategic planning in tourism.
    - Link tourism-industry revenues to environment-agency funding to boost value of natural capital assets.
    - Ensure authorities’ commitment and community engagement to protect natural-resource base.
- Mining and exhaustible resources:
  - Guinea-Bissau "is known to possess significant mineral deposits, especially phosphates and bauxite," and may hold exploitable oil reserves in territorial waters.
  - PRSP II does not treat exploration and extraction issues in sufficient detail.
  - Staff concerns and recommendations:
    - Present a more comprehensive analysis of sectoral challenges (defining mineral rights, setting tariff rates, tendering contracts, ensuring operational oversight).
    - Assess how rising mineral-product commodity exports may affect other economic sectors.
    - Develop, with cooperating partners, "a much more circumspect and comprehensive policy for the mining and mineral-resource sector."

### Infrastructure: key constraints and sectoral priorities
- Overall assessment:
  - Basic infrastructure is in a "dire state" and is a binding constraint on growth.
  - PRSP II focuses on energy, seaports, and the road network to improve growth conditions.
- Energy sector findings:
  - Prolonged electricity crisis causing regular blackouts, high operating costs, large losses (including theft via illegal connections), high retail tariffs, low bill collection rates, significant fiscal burden via subsidies, and very high consumer costs for self-generated power.
  - Government plans to promote institutional reforms of the state energy and water utility EAGB are welcomed by staffs.
- Port of Bissau findings:
  - Problems include poor operational performance, high tariffs, decaying infrastructure, and poor corporate governance.
  - PRSP II lacks sufficient detail on how port improvements should be achieved.
  - Staffs: strategy must address both physical investment and institutional needs.
- Roads:
  - Focus on maintenance of the national network and expansion of rural access roads is appropriate.
  - Staff emphasis: integrate policy actions into a strategic framework for the transportation sector.

### Environment and natural resource management
- Findings:
  - PRSP II stresses environmental sustainability and improving natural resource management regulations.
  - Government has adopted regulations for concession of environmental licenses and requirements for projects using natural resources or generating environmental externalities.
- Staff recommendation:
  - Enhance institutional capacity of natural resource management entities.

### Human development: education and vocational training
- Education findings:
  - Enrollment rates have increased, but service quality has degraded as coverage expanded.
  - Gender equality: although girls’ enrollment rates for primary and secondary school are "nearing parity" with boys, "female students remain between 1.4 and 2 times less likely to graduate than their male counterparts."
  - Public teaching-staff management is a major systemic problem: chaotic hiring system, effectively no qualifications required, number of teachers hired routinely exceeds the salary budget, leading to arrears and frequent teacher strikes.
- Staff recommendations:
  - Government should address personnel management directly, "utilizing similar methods to those employed in the ongoing reform of the public service."
  - Develop a separate action plan for vocational training, consistent with sector-specific economic objectives, since "adult education and vocational training are virtually absent from the PRSP II."

### Health
- Findings:
  - Improvements in health-status indicators during the past decade despite political instability and high poverty.
  - Infant and under-five mortality rates dropped significantly; maternal mortality remains "one of the highest in Africa."
  - Immunizations, antenatal care, and deliveries assisted by a health professional increased due to investments in infrastructure, training, and administrative improvements.
- HIV/AIDS:
  - Authorities prepared a National Strategic Plan (PEN) for "the period 2011–2013" emphasizing prevention, care and treatment, and multisectoral approach.
  - HIV prevalence in Guinea-Bissau is "relatively low at an estimated at 2.6%, but in some urban areas it now reaches as high as 5.6%."
  - Official information campaigns have raised awareness, though information on preventative measures remains limited.
- Staff recommendations:
  - Conduct an in-depth analysis of human-resources needs, prospective facility expansion, and financial implications.
  - Consider alternative service-delivery models, including community-based and public outreach interventions.
  - Focus awareness and prevention efforts on areas targeted for rapid economic growth, given rising infection risks linked to increasing economic connectivity.

### Implementation, monitoring and evaluation (M&E)
- Implementation structure:
  - Three levels: (i) steering committee (decision-making, strategic orientations, approving prioritized action plan), (ii) technical committee (coordination and M&E), and (iii) planning and monitoring committees at sector levels (support implementing agencies, collect raw data).
  - Representatives of Guinea-Bissau’s partners included in the steering committee.
  - Staffs find the proposed implementation arrangement "comprehensive and appropriate" but note capacity constraints.
- Budget linkages:
  - Explicit link between PRSP II and the budget cycle is an improvement over NPRSP I.
  - Progress in budget classification, planning and execution expected to allow alignment of budget allocations with PRSP II priorities.
  - Government intends to adopt an MTEF with cooperating partners’ support; staffs encourage a realistic view on timeframe and administrative groundwork required.
- M&E system proposals:
  - Two primary components: (i) continuing assessment of poverty trends and household living conditions coordinated by the National Institute of Statistics (INE); and (ii) monitoring PRSP II implementation coordinated by the National Directorate of Planning (DNP) at the Ministry of Economy, Planning and Regional Integration (MEPIR).
- Staff concerns:
  - Allocation of responsibilities for managing M&E and specificity of objectives for strengthening institutional framework.
  - Lack of sound sector-level statistics could jeopardize M&E functioning.
  - INE designed an action plan under the National Strategy for the Development of Statistics (SNDE) focused on strengthening statistical capacity, but statistical capacity development is absent as an explicit PRSP II priority.
  - Cooperating partners can provide technical assistance but cannot supplant the government's primary role in data collection and analysis.

### Conclusion: implementation risks and priorities
- Overall assessment:
  - PRSP II is "a comprehensive medium-term development strategy" but faces challenges from low technical, financial, institutional and aid-absorption capacities.
  - Political instability is a persistent risk; sustained progress in defense and security sector reforms is a "fundamental prerequisite for political stability."
  - Success depends on prioritized action plans based on reliable estimates of available resources and realistic implementation capacity of government agencies.
  - Improvements in public financial management will aid strategic allocation and expenditure efficiency.
  - As the government intends to increase domestic-revenue mobilization to finance PRSP II, consolidation of budgetary and financial management reforms is "especially crucial."
- Staff request:
  - Executive Directors’ views are sought regarding agreement with main areas identified by staffs as priorities for strengthening strategy and implementation, and areas identified as key implementation risks.

*Source: IMF staff report excerpt (content unit _cr11352).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2011/_cr11352.pdf_