IMF Management Completes Second Review of the Staff-Monitored Program with Guinea Bissau

IMF News, February 14, 2022

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Canonical URL: IMF Management Completes Second Review of the Staff-Monitored Program with Guinea Bissau

IMF Management approved the completion of the second review of Guinea Bissau’s Staff-Monitored Program (SMP).
The SMP was approved on July 19, 2021.
Management approved the second review on January 31, 2021.
The SMP supports the government’s home-grown program of reforms aimed at stabilizing the economy, improving competitiveness, and strengthening governance.
A successful track record of policy and reform implementation under the SMP is a key requirement for a transition towards a possible Extended Credit Facility (ECF) arrangement in 2022.
It will be important to maintain good performance for the third and last review of the SMP, and for international partners to provide Guinea Bissau with sufficient support through its transition.

GDP growth:
- 1.5 percent in 2020.
- Projected to accelerate to 3.8 percent in 2021.
Drivers of the 2021 growth projection:
- Higher cashew nut production.
- Public investment in critical externally financed infrastructure.
- Gradual lifting of COVID-19 containment measures.
- Gradual improvement in business confidence.
Authorities achieved satisfactory progress on reform implementation as of end-September 2021 despite difficult socio-economic conditions compounded by the COVID-19 pandemic.
In a context of very constrained resources, the authorities managed to achieve good vaccination rates by regional standards.

Overall fiscal deficit:
- Projected to fall to 5.4 percent of GDP in 2021 from 10.0 percent of GDP in 2020.
Drivers of fiscal adjustment:
- Unwinding of pandemic-related effects.
- Greater revenue mobilization.
- Expenditure controls adopted in the 2021 budget and the SMP.
Fiscal consolidation is expected to:
- Continue creating fiscal space.
- Crowd-in donor support to protect priority spending in education, health, pandemic-related expenditures, and key infrastructure investments.
Public debt:
- Stock of public debt is projected to slightly increase in 2021, mainly because of domestic currency depreciation and the rephasing of the clearance of legacy arrears.

The authorities decided to use the recent SDR 27.2 million allocation (about US$38.4 million) to:
- Buttress debt sustainability by anticipating service of non-concessional loans from the regional development bank due up to 2022.
- Cover COVID-19 related expenditures, including vaccination and improvement in health services.

Timely implementation of governance and transparency reforms is key to the SMP’s success and addressing long-standing socioeconomic challenges.
Priority measures include:
- Enhance fiscal governance, transparency, and accountability.
- Strengthen expenditure control.
- Strengthen tax and custom frameworks.
- Fight corruption.
- Mitigate SOEs’ risks, notably those stemming from the water and electricity company.
- Amend the legal procurement framework to enable the collection and publication of beneficial ownership information.
- Modernize the Asset Declaration Regime.
The IMF supports implementation through capacity development in coordination with international partners and bolsters authorities’ efforts to mobilize external concessional financing.

Press Release No. 22/37 — February 14, 2022, IMF Communications Department.