IMF Managing Director Approves a Staff Monitored Program for Guinea-Bissau

IMF News, July 27, 2021

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Bibliographic details

• Published: July 27, 2021

Overview and purpose of the SMP

• The Managing Director of the IMF approved a Staff-Monitored Program (SMP) for Guinea-Bissau for the period July 2021 to April 2022.
• The nine-month SMP will help build a strong track record of policy and reform implementation, possibly paving the way for an IMF-supported program (Extended Credit Facility) in early 2022.
• The SMP supports the government’s home-grown reform program aimed at stabilizing the economy, improving competitiveness, and strengthening governance.
• An SMP is an informal agreement between country authorities and Fund staff to monitor the implementation of the authorities’ economic program. SMPs do not entail financial assistance or endorsement by the IMF Executive Board.

COVID-19 impact and immediate policy response

• Guinea-Bissau has been significantly affected by the COVID-19 pandemic, which disrupted economic activity and led to a deterioration in the external and fiscal position; the effects persisted in 2021.
• Immediate priorities included limiting the pandemic’s impact and preserving macroeconomic and financial stability.
• Health spending was increased and measures to protect the most vulnerable and support the agricultural sector were implemented, requiring international financial support, including a Rapid Credit Facility approved by the IMF Board on January 25, 2021.
• Emergency assistance has been mostly in the form of grants and highly concessional loans given limited fiscal space and debt vulnerabilities.
• Participation in the Catastrophe Containment and Relief Trust and the G20 Debt Service Suspension Initiative would provide additional resources to fight the pandemic and enhance debt sustainability prospects.

Fiscal governance, transparency, and safeguards

• Authorities committed to:
  • Reinforcing fiscal governance and transparency to ensure emergency budgetary allocations from the RCF are spent appropriately.
  • Managing all COVID-19 related spending using a dedicated account at the BCEAO.
  • Publishing bi-monthly reports on COVID-19 related expenditures and information on public procurement contracts.
  • Undertaking an ex-post independent audit of crisis-mitigation spending.

Key economic projections and selected indicators (2019–26; columns by year: 2019, 2020, 2021 Prel., 2022 Proj., 2023, 2024, 2025, 2026)

• National accounts and prices
  • Real GDP at market prices: 4.5, -1.4, 3.3, 4.0, 5.0
  • Real GDP per capita: 2.3, -3.5, 1.1, 1.7, 2.8, 2.9
  • GDP deflator: -0.9, 2.7
  • Consumer price index (annual average): 0.3, 1.5, 1.9, 2.0
• External sector
  • Exports, f.o.b. (CFA francs): -22.7, -21.1, 9.4, 6.9, 6.7, 6.2, 5.5, 4.7
  • Imports, f.o.b. (CFA francs): 20.5, -8.3, 4.3, 4.9, 5.6
  • Terms of trade (deterioration = -): -31.4, -3.7, -8.2, 4.2, 3.8, 2.5, 2.4
  • Real effective exchange rate (depreciation = -): -2.8, …
  • Exchange rate (CFAF per US$; average): 585.9, 574.8
• Government finances (annual percent change or percent of GDP as indicated)
  • Revenue excluding grants: 9.2, -5.5, 15.2, 11.6, 10.2, 9.1, 7.5
  • Expenditure: -3.0, 30.5, -3.2, 5.3, 7.4, 3.7, 7.7
  • Current expenditure: 18.2, 10.1, -2.1, 5.4, 6.6
  • Capital expenditure: -38.5, 96.7, -5.2, 11.1, 0.4, 1.6, 10.0
• Money and credit
  • Domestic credit: 13.8, -1.7, 13.5, 14.2, 12.5, 10.3, 8.1
  • Credit to the government (net): -19.7, -6.4, -7.5, -6.7, -6.0
  • Credit to the economy: 5.9, 12.9, 18.9, 16.0, 12.7, 9.7
  • Net domestic assets: 11.9, -13.8, 7.6, 20.9, 20.6, 17.1, 13.6
  • Broad money (M2): 0.9, 6.4, 6.5, 5.2
• Investments and savings (percent of GDP)
  • Gross investment: 22.4, 21.1, 21.8, 21.2
  • Of which: government investment: 8.4, 16.9, 15.1, 14.9, 15.3, 14.3, 13.4, 13.7
  • Gross domestic savings: 8.7, 10.9
  • Of which: government savings: 1.8, 3.4, 6.0
  • Gross national savings: 14.1, 15.6, 17.0, 16.3, 16.1, 16.8, 12.1, 13.1, 14.0
• Fiscal balances (percent of GDP)
  • Domestic primary expenditure: 13.9, 16.2, 14.7
  • Domestic primary balance: -4.1, -1.8, -1.2, -0.7, 0.1, 0.6, 0.5
  • Overall balance (commitment basis) including grants: -3.9, -9.5, -5.0, -4.6, -4.2, -3.6
  • Overall balance excluding grants: -6.8, -13.7, -10.4, -9.1, -8.1, -7.4
• External current account (percent of GDP)
  • External current account: -8.8, -8.5, -4.8, -4.5, -4.4
  • Excluding official current transfers: -10.0, -9.7, -11.4, -8.6, -7.9, -7.1, -7.0
• Public debt (percent of GDP)
  • Stock of public and publicly guaranteed debt: 65.9, 79.3, 78.4, 77.5, 75.7, 73.6, 71.1, 68.8
  • Of which: external debt: 24.2, 25.4, 26.7, 24.9, 23.1, 21.7, 20.4, 19.4
• Memorandum items
  • Nominal GDP at market prices (CFAF billions): 843.5, 824.1, 874.2, 934.7, 1008.9, 1089.0, 1175.4, 1268.8
  • WAEMU gross official reserves (billions of US$): 17.6
  • (percent of broad money): 34.2, 32.9

Policy implications and next steps

• The SMP provides a window of opportunity to implement fundamental reforms to address major macro imbalances and lay the groundwork for inclusive growth.
• Authorities have initiated an ambitious fiscal consolidation program starting in 2021 to ensure debt sustainability while addressing developmental needs.
• The authorities requested the SMP to build a sound track record in preparation for an Extended Credit Facility in early 2022.
• Continued engagement with development partners and participation in debt relief initiatives are highlighted as important to secure resources for pandemic response and to enhance debt sustainability.

Source: IMF Managing Director Approves a Staff Monitored Program for Guinea-Bissau, Press Release No. 21/229 (July 27, 2021).

References

• https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva
• Guinea-Bissau and the IMF
• Press Releases
• PRESS CENTER
• Staff-Monitored Program
• Extended Credit Facility
• Rapid Credit Facility
• see Press Release No: 21/21
• Catastrophe Containment and Relief Trust
• G20 Debt Service Suspension Initiative
• https://www.imf.org/en/home