An International Monetary Fund (IMF) team led by Felix Fischer visited Guinea Bissau from September 13–26, 2016 to conduct discussions on the first and
second reviews of Guinea Bissau’s IMF-supported program under the Extended Credit Facility (ECF).
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The program aims to consolidate the fiscal position through better expenditure management and enhanced revenue mobilization, deepen institutional reforms,
and develop the private sector to support growth and job creation.
At the conclusion of the visit, Mr. Fischer issued the following statement:
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The political environment in Guinea-Bissau has improved, and the authorities are not only determined to bring the ECF-supported program back on track, they
have also reiterated their commitment to the program. The mission met with key political actors, who expressed that they were supportive of a continued IMF
program.
“Discussions focused on the key objectives of the government’s economic program, that aims to consolidate the fiscal position through better expenditure
management and enhanced revenue mobilization, deepen institutional reforms, and develop the private sector to support growth and job creation. The program
focuses on strengthening budgetary transparency as well as public investment and debt management, improving the compilation of statistics, and addressing
governance issues.
“The security situation has remained stable over the last six months. A good cashew harvest provided liquidity to the economy and brought much needed
relief to the numerous small landowners spread across the country. The short and medium-term economic outlook remains positive. Buoyed by
rising global market prices, cashew nut output is expected to increase further in 2016 and economic growth to reach close to 5 percent in 2016. Consumer
price inflation, which averaged 1.5 percent in 2015, is expected to remain low.
“The government appointed in June 2016 is making steadfast efforts to improve the management of public finances and to implement some key reforms. During
the first four months, transparency of public finances improved through the rigorous organization of weekly treasury committee meetings. The government has
declared the expensive bank bailout contracts (5.5 percent of GDP) null. As a precautionary measure, the bank bailout has been put on hold by the regional
court through an injunction until the courts rule on the validity of the bailout contracts. The mission welcomes these actions to unwind the bank bailout
and to safeguard public finances.
“The fiscal situation in 2016 has been under severe strain, mainly owing to a loss of budget support from development partners. In this context, the
mission welcomes the Council of Ministers’ decision to sell part of the seized wood, which will be an important government revenue for closing the fiscal
gap in 2016. Projections for 2017 envisage a tightening of the fiscal stance, which will be supported by vigorous revenue mobilization and cautious
spending. This will be underpinned by continued strengthening of tax administration and public financial management procedures.
“Negotiations on fiscal measures needed to close the 2016 fiscal gap, which are needed for the completion of the reviews, are at an advanced stage and will
continue in October in Washington during Annual Meetings of the IMF.
“The mission met with President José Mário Vaz, Prime Minister Baciro Djá, President of the National Assembly Cipriano Cassamá, Attorney General António
Sedja Mam, Finance Minister Henrique Horta Dos Santos and several Ministers, Central Bank of West African States (BCEAO) National Director João Fadia,
senior government and BCEAO officials, representatives of the financial sector, private sector, development partners and civil society.
“The IMF mission wishes to express its gratitude to the authorities for the constructive discussions held during its visit to Guinea Bissau.”
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The ECF is a lending arrangement that provides sustained program engagement over the
medium to long-term in case of protracted balance of payments problems. The arrangement for Guinea Bissau in an amount equivalent to SDR 17.04
million (about US$23.9 million or 60 percent of quota) was approved on July 10, 2015 (see Press Release No.15/331).
