IMF Survey: IMF, World Bank Back $1.2 Billion Debt Relief for Guinea-Bissau

IMF News, December 17, 2010

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Bibliographic details

• Authors: Paulo Drummond IMF African Department December
• Published: December 17, 2010

Overview

• Publication date: December 17, 2010
• The IMF and the World Bank decided, on December 13 and 16, respectively, to support $1.2 billion in debt relief for Guinea-Bissau.
• The move will cut the country’s external debt by 87 percent and help normalize relations with external creditors, while sending a positive signal to donors and potential investors.

Debt relief for Africa — details and amounts

• Total debt service savings generated: $1.2 billion.
• Composition of debt relief:
  • $703 million in HIPC debt relief
  • $107.9 million in additional debt relief from the Paris Club group of creditors
  • $230.3 million in debt relief under topping-up assistance
  • $139.2 million in debt relief under the MDRI
• Contributions from multilateral institutions:
  • Debt relief from the IMF: $15 million
  • Debt relief from the World Bank: $347.2 million
• Timing and impact:
  • Present value of Guinea-Bissau’s external debt at end-2009 will be reduced by 87 percent.
  • Reached the final stage, or completion point, of the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative; also qualifies for debt relief under the Multilateral Debt Relief Initiative (MDRI).

Economic and policy context — road to HIPC completion

• History and program support:
  • Reached the interim HIPC decision point in 2000.
  • IMF staff-monitored programs in 2006 and 2007.
  • Emergency Post-Conflict Assistance (EPCA) in 2008 and 2009.
  • Approval, in May 2010, of a three-year Extended Credit Facility arrangement with the IMF.
• Macroeconomic performance and reforms:
  • Solid performance under the 2009 EPCA-supported economic program stabilized the economy.
  • Under the Extended Credit Facility arrangement, the government maintained sound macroeconomic policies and accelerated reforms.
  • GDP growth has been resilient, inflation is low, fiscal revenues have exceeded the program targets, and spending has been kept under control.
  • Structural measures taken: strengthen budget planning and execution, increase revenue collection, and improve the business environment.

Key accomplishments tied to HIPC completion point

• Achievements linked to poverty reduction, macroeconomic stability, social sectors, and demobilization:
  • Implementing a poverty reduction strategy prepared in a participatory process involving all segments of society
  • Overhauling of the public procurement system in line with West African Economic Monetary Union (WAEMU) guidelines
  • Bringing the public expenditure management system in line with WAEMU standards, and resuming quarterly budget execution reports
  • Introducing free primary education in public schools, and raising enrollment rates
  • Providing vaccination to more than 90 percent of children
  • Raising awareness of HIV/AIDS: about 91 percent of women aged 15–49 have heard of HIV/AIDS, and 64 percent know that it can be transmitted from mother to child

Next steps and policy recommendations

• Short- and medium-term financing guidance:
  • Guinea-Bissau should continue to rely on grants and nonconcessional borrowing to meet its financing needs for the foreseeable future.
• Conditions for lasting debt sustainability and development progress:
  • Political stability
  • Further progress on economic reforms, including security sector reform
  • Diversifying the export base
  • Mobilizing more domestic revenue
• Objective:
  • Secure debt sustainability and sustain growth and poverty reduction, including progress toward the antipoverty Millennium Development Goals.

Source: IMF Survey: IMF, World Bank Back $1.2 Billion Debt Relief for Guinea-Bissau (December 17, 2010).

References

• https://www.imf.org/en/News/country-focus
• PRESS CENTER
• IMF Country Focus
• Press release
• Guinea-Bissau and the IMF
• Africa set for growth
• Boost from intraAfrica trade
• Recovery under way in Africa
• Private sector gains in Africa
• Africa after global crisis
• Africa’s growth set to rebound
• https://www.imf.org/en/home