IMF Staff Concludes Visit to Guinea-Bissau

IMF News, January 18, 2019

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Mission led by Tobias Rasmussen visited Guinea-Bissau during January 14-18, 2019 to evaluate the draft 2019 budget and discuss developments in the financial sector.
The mission issued a statement presenting preliminary findings; the views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
This mission will not result in a Board discussion; the mission did not conclude discussions on the pending sixth review of the ECF program and expects to return after the legislative elections.

Cashew exports declined by about 25 percent.
Real GDP growth is estimated to have fallen to 3.8 percent in 2018 against roughly 6 percent a year during 2015–17.
Lower growth and weak revenue collection led to missed fiscal targets.
The fiscal deficit on commitment basis is estimated to have widened to about 5 percent of GDP against a target of 2.5 percent of GDP.
Economic performance in 2018 suffered from lower cashew income and weak domestic revenue mobilization.

The draft budget for 2019 aims to consolidate public finances.
The draft budget targets increased government revenue and modest expenditure growth to bring the deficit below 3 percent of GDP, in line with the WAEMU criterion.
Higher revenue in the draft budget is supported by:
- recent passage of two new tax laws;
- reform of the customs brigade;
- collection of stamp duty on air transport; and
- adjustment of some tax rates.
Achieving the envisioned targets will require tight expenditure control and additional effort in some areas.

The public water and electricity utility, EAGB, has been a longstanding drain on government funds and is likely to require further transfers to cover accumulated liabilities.
- Identifying offsetting savings and finalizing the planned reform of EAGB should be a top priority.
The government capital budget is a pressure point, reflecting the need for better alignment with underlying investment projects.
Avoiding arrears and unregularized expenditures will be essential for sound public financial management.

Maintaining a conducive environment for private sector activity would support a pickup in economic growth in 2019.
Ensuring a transparent and competitive cashew marketing season will be critical, starting with the announcement of a reference price consistent with international price developments.
Addressing weaknesses in banks and ensuring compliance with prudential norms will be essential to maintain a healthy financial sector.

The IMF remains committed to supporting good economic governance in Guinea-Bissau.
The mission expects to return to Bissau as soon as possible after the legislative elections for discussions with the incoming government.
The team met with President José Mário Vaz; Prime Minister and Minister of Finance Aristides Gomes; Public Prosecutor General Bacari Biai; BCEAO National Director Helena Nosolini Embaló; other high-level officials; and representatives of the private sector and the donor community.

IMF staff statement, January 18, 2019.