IMF Executive Board Completes the Second Review under the Extended Credit Facility Arrangement for Guinea-Bissau and Approves US$3.15 Million Disbursement

IMF News, August 30, 2023

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Canonical URL: IMF Executive Board Completes the Second Review under the Extended Credit Facility Arrangement for Guinea-Bissau and Approves US$3.15 Million Disbursement

The Executive Board completed the second review under Guinea-Bissau’s Extended Credit Facility (ECF) arrangement.
The completion enables an immediate disbursement of SDR2.37 million (about US$3.15 million) to help meet balance-of-payments and fiscal financing needs amid external shocks.
Total disbursements under the ECF arrangement to date: SDR7.11 million (about US$9.46 million).
The Board approved a waiver for nonobservance of performance criteria on:
- the floor on tax revenue,
- the ceiling on wages,
- the floor on the domestic primary fiscal balance.
Financing assurances review completed; rephasing of access agreed to make two disbursements of SDR2.37 million on January 17 and April 17, 2024, instead of a single disbursement on April 17, 2024.
The new government resulting from the winning coalition of the June 4, 2023, legislative election expressed commitment to implementing the program reform agenda.

Real GDP growth:
- 2022: 4.2 percent.
- 2023 projection: 4.5 percent (recovery described as moderate).
- 2024 projection: 5.0 percent.
Real GDP per capita projections (annual percent change):
- 2022: 1.9
- 2023: 2.3
- 2024: 2.8
- 2025: 2.9
- 2026: 2.4
Inflation:
- Consumer price index (annual average): 2022: 7.0 percent; 2023 projection: 3.0 percent; 2024 projection: 2.0 percent.
- GDP deflator: 2022: 7.3; 2023 projection: 6.9; 2024 projection: 3.1.
External sector:
- Exports, f.o.b. (CFA francs): 2022: -14.3 (annual percent change); 2023 projection: 10.4; 2024 projection: 29.6.
- Imports, f.o.b. (CFA francs): 2022: 25.3 (annual percent change); 2023 projection: 4.9; 2024 projection: 7.8.
- Terms of trade (deterioration = -): 2022: -10.1; 2023 projection: 1.0; 2024 projection: 9.0.
- Exchange rate (CFAF per US$; average): 2020: 574.8; 2021: 554.2; 2022: 622.4.
Drivers and risks:
- Growth has been negatively affected by low cashew exports and adverse external shocks.
- Surge in food and oil prices is adding pressure on annual inflation.
- Downside risks cited: long-standing fragility constraints, uncertainty in the global economy with potential adverse spillovers on cashew exports and food and energy prices, and climate shocks.

Fiscal performance:
- Overall fiscal deficit: remained at 5.9 percent of GDP in 2022.
- Government undertook corrective actions after missed targets, including strengthening expenditure controls, selling 5G licenses, and rationalizing tax expenditures to meet end-2023 targets.
Public debt:
- Based on provisional data, stock of public and publicly guaranteed debt: 2022: 80.3 percent of GDP.
- Drivers of the increase: higher-than-projected overall fiscal deficit, new government guarantees mainly to the public utility company, and recognition of cross-arrears owed to suppliers with non-performing loans at the undercapitalized bank.
- Stock of public and publicly guaranteed debt projections:
- 2023: 75.5 percent of GDP
- 2024: 73.1 percent of GDP
- 2025: 70.9 percent of GDP
- 2026: 68.8 percent of GDP
- 2027: 67.0 percent of GDP
- 2028: 65.7 percent of GDP
- Of which: external debt: 2022: 39.2 percent of GDP; 2023 projection: 35.8; 2024: 32.3; 2025: 30.2; 2026: 28.4; 2027: 27.0.
Fiscal policy priorities:
- Revenue mobilization and expenditure containment remain pivotal to prevent risks to debt sustainability and access to external financing.
- Commitment to fiscal consolidation to meet regional convergence criteria, including strengthening governance and management of public resources, mitigating fiscal risks, and relying on highly concessional financing.

Program progress:
- Program performance described as satisfactory: five out of eight quantitative performance criteria (QPCs) for March 2023 were met.
- Authorities proposed four new structural benchmarks to:
- accelerate the professionalization of the tax function,
- reintroduce expenditure controls,
- improve the governance of state property.
- A quarterly review will be added this year to ensure close monitoring under high uncertainty.
Governance and anti-corruption:
- Authorities implemented transparency commitments related to COVID-19 emergency spending, including publication of the third-party audit and beneficial ownership information of public contracts.
- Progress in priority audits by the Audit Court.
- Progress in mitigating fiscal risks from the public utility company.
- Authorities remain committed to modernize the asset declaration regime and improve the AML/CFT framework.
Structural priorities:
- Strengthen institutional capacity through structural and governance reforms.
- Enhance economic diversification.
- Ensure banking vulnerabilities are managed effectively.
IMF view (statement by Mr. Okamura, Deputy Managing Director and Acting Chair):
- Emphasized commitment to program implementation, ambitious fiscal consolidation to support inclusive growth while preserving debt sustainability, and the critical role of reform implementation to catalyze additional donor support.

Real GDP at market prices (annual percent change):
- 2020: 1.5
- 2021: 6.4
- 2022: 4.2
- 2023 (Proj.): 4.5
- 2024 (Proj.): 5.0
Consumer price index (annual average):
- 2020: 3.3
- 2021: 7.9
- 2022: 7.0
- 2023 (Proj.): 3.0
- 2024 (Proj.): 2.0
Revenue excluding grants (percent of GDP):
- 2020: -5.5
- 2021: 22.7
- 2022: 3.4
- 2023 (Proj.): 19.3
- 2024 (Proj.): 9.3
- 2025 (Proj.): 9.8
- 2026 (Proj.): 10.2
- 2027 (Proj.): 10.0
- 2028 (Proj.): 8.7
Expenditure (annual percent change):
- 2020: 33.8
- 2021: 8.9
- 2022: -5.2
- 2023 (Proj.): 6.0
- 2024 (Proj.): 6.1
Domestic primary balance (percent of GDP):
- 2020: -4.6
- 2021: -1.9
- 2022: -3.2
- 2023 (Proj.): -0.2
- 2024 (Proj.): 0.4
- 2025 (Proj.): 0.6
- 2026 (Proj.): 0.7
Overall balance (commitment basis), including grants (percent of GDP):
- 2021: -9.6
- 2022: -5.9
- 2023 (Proj.): -3.5
- 2024 (Proj.): -3.0
External current account (percent of GDP):
- 2020: -2.6
- 2021: -0.8
- 2022: -7.1
- 2023 (Proj.): -4.3
- 2024 (Proj.): -4.1
Nominal GDP at market prices (CFAF billions):
- 2020: 875.2
- 2021: 956.3
- 2022: 1069.2
- 2023 (Proj.): 1194.4
- 2024 (Proj.): 1293.0
- 2025 (Proj.): 1395.7
- 2026 (Proj.): 1506.5
- 2027 (Proj.): 1626.1
- 2028 (Proj.): 1746.9
WAEMU gross official reserves (billions of US$):
- 2020: 21.8
- 2021: 24.5
- 2022: 25.2

Source: IMF Executive Board press release, Press Release No. 23/299 (August 30, 2023).