{
  "title": "Press Release: IMF Approves Extension and Augmentation of ESAF for Guinea-Bissau",
  "publication": "IMF News, July 25, 1997",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9734",
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  "summary": "IMF approved the government's request to extend the three-year arrangement under the Enhanced Structural Adjustment Facility (ESAF) to end-March 1998, and to augment the amount available by SDR 1.05 million (about US$1.4 million).",
  "publishDate": "1997-07-25",
  "sections": [
    {
      "heading": "Approval and financing",
      "content": "- IMF approved the government's request to extend the three-year arrangement under the Enhanced Structural Adjustment Facility (ESAF) to end-March 1998, and to augment the amount available by SDR 1.05 million (about US$1.4 million).\n- This augmentation provides SDR 4.725 million (about US$6.5 million) to support the government’s economic program for 1997-98.\n- The IMF had approved a three-year ESAF loan for Guinea-Bissau equivalent to SDR 9.45 million (about US$13 million) on January 18, 1995.\n- Note on ESAF terms: ESAF loans carry an interest rate of 0.5 percent a year and are repayable over 10 years, with a 5½-year grace period."
    },
    {
      "heading": "Background: economic performance in 1996",
      "content": "- Real GDP growth in 1996 is estimated at 5 percent, compared to 4.4 percent in 1995.\n- External current account deficit improved in 1996.\n- Inflation remained a source of concern: 51 percent on an average annual basis in 1996.\n- High inflation was fueled by monetary expansion in the first half of 1996 and a sharp depreciation of the peso in the third quarter linked to uncertainties about entry into WAEMU.\n- After significant monetary tightening late in 1996, monthly inflation leveled off to 1 percent during the first quarter of 1997, down from an average of 5.5 percent in 1996.\n- Fiscal developments in 1996: revenue lower and current expenditure higher than planned.\n- Progress in structural reforms was largely on track.\n- At end-December 1996, agreement was reached with BCEAO and WAEMU countries on Guinea-Bissau’s entry into WAEMU and on implementing the currency conversion from the peso to the CFA franc on May 2, 1997."
    },
    {
      "heading": "Medium-term strategy and the 1997-98 program",
      "content": "- Medium-term objectives for 1997-99:\n  - Maintain annual economic growth of about 5 percent.\n  - Lower the average annual rate of inflation to about 6 percent in 1999 from 51 percent in 1996.\n  - Reduce the external current account deficit (excluding grants) by about 5 percentage points to 16 percent of GDP by 1999.\n  - Maintain investment at 22 percent of GDP while raising gross domestic saving to 4 percent of GDP in 1999 from 1 percent of GDP in 1996.\n- 1997-98 program targets (supported by the third annual ESAF loan):\n  - Annual real GDP growth of about 5 percent.\n  - Contain annual inflation (end-period basis) at about 10 percent in 1997 and 7 percent in 1998.\n  - Reduce the external current account deficit (excluding grants) to 18 percent of GDP in 1997 and to 16.4 percent of GDP in 1998.\n- Fiscal policy priorities:\n  - Raise the current primary surplus through an increase in the revenue/GDP ratio and overhaul the tax system.\n  - Reduce the central government deficit to 12.3 percent of GDP in 1997 from 18 percent of GDP in 1996.\n  - Introduce a general sales tax and a major reform of external tariffs; reduce export taxes; revise excise taxes, particularly on petroleum.\n  - Contain nonessential outlays and streamline the civil service to allow higher salaries for skilled personnel, particularly teachers.\n  - Strengthen budgetary procedures in 1997: prior authorization of the Ministry of Finance Budget Directorate required for all expenditure commitments.\n- Monetary policy: domestic credit policy to remain tight to quell inflationary expectations."
    },
    {
      "heading": "Structural reforms",
      "content": "- Continued focus on:\n  - Accelerating public enterprise privatization.\n  - Increasing efficiency in the energy sector.\n  - Enhancing private sector role in agriculture, fisheries, and forestry.\n  - Improving social services.\n  - Reforming the civil service."
    },
    {
      "heading": "Addressing social needs",
      "content": "- Growth strategy relies on broad-based and export-led development of agriculture, with important contributions from fisheries and forestry.\n- Poverty alleviation approach:\n  - Rural-centered and labor-intensive growth.\n  - Securing access to primary health, education, and sanitation services, especially in rural areas."
    },
    {
      "heading": "The challenge ahead",
      "content": "- External debt situation remains extremely burdensome; debt indicators are significantly above thresholds of sustainability.\n- External financing requirement for 1997 expected to be filled with bilateral and multilateral assistance, including debt relief under negotiation from non-Paris Club creditors.\n- IMF membership and quota:\n  - Guinea-Bissau joined the IMF on March 24, 1977.\n  - Quota is SDR 10.5 million (about US$14 million).\n  - Outstanding use of IMF financing currently totals SDR 7 million (about US$10 million)."
    },
    {
      "heading": "Selected economic indicators (sources: Guinea-Bissau authorities; IMF staff estimates and projections)",
      "content": "- Percent change\n  - Real GDP:\n    - 1995: 4.4\n    - 1996: 5.1\n    - 1997: 4.9\n  - Consumer prices (end of period):\n    - 1995: 49.7\n    - 1996: 65.6\n    - 1997: 10.3\n    - 1998: 7.0\n    - 1999: 5.0\n- Percent of GDP\n  - Overall fiscal balance, excluding official transfers (deficit -):\n    - 1995: -17.7\n    - 1996: -18.0\n    - 1997: -12.3\n    - 1998: -12.7\n    - 1999: -12.2\n  - External current account balance (deficit -):\n    - 1996: -23.6\n    - 1997: -20.5\n    - 1998: -16.4\n    - 1999: -15.5\n- Months of imports\n  - Gross international reserves:\n    - 1995: 2.7\n    - 1996: 2.6\n    - 1997: ...\n\nEstimate.\nProgram.\n\n---\n\n\n References\n\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9734"
    }
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    "Published: July 25, 1997",
    "IMF approved the government's request to extend the three-year arrangement under the Enhanced Structural Adjustment Facility (ESAF) to end-March 1998, and to augment the amount available by SDR 1.05 million (about US$1.4 million).",
    "This augmentation provides SDR 4.725 million (about US$6.5 million) to support the government’s economic program for 1997-98.",
    "The IMF had approved a three-year ESAF loan for Guinea-Bissau equivalent to SDR 9.45 million (about US$13 million) on January 18, 1995.",
    "Note on ESAF terms: ESAF loans carry an interest rate of 0.5 percent a year and are repayable over 10 years, with a 5½-year grace period.",
    "Real GDP growth in 1996 is estimated at 5 percent, compared to 4.4 percent in 1995.",
    "External current account deficit improved in 1996.",
    "Inflation remained a source of concern: 51 percent on an average annual basis in 1996.",
    "High inflation was fueled by monetary expansion in the first half of 1996 and a sharp depreciation of the peso in the third quarter linked to uncertainties about entry into WAEMU.",
    "After significant monetary tightening late in 1996, monthly inflation leveled off to 1 percent during the first quarter of 1997, down from an average of 5.5 percent in 1996.",
    "Fiscal developments in 1996: revenue lower and current expenditure higher than planned.",
    "Progress in structural reforms was largely on track.",
    "At end-December 1996, agreement was reached with BCEAO and WAEMU countries on Guinea-Bissau’s entry into WAEMU and on implementing the currency conversion from the peso to the CFA franc on May 2, 1997.",
    "Medium-term objectives for 1997-99:",
    "1997-98 program targets (supported by the third annual ESAF loan):",
    "Fiscal policy priorities:",
    "Monetary policy: domestic credit policy to remain tight to quell inflationary expectations.",
    "Continued focus on:",
    "Growth strategy relies on broad-based and export-led development of agriculture, with important contributions from fisheries and forestry.",
    "Poverty alleviation approach:",
    "External debt situation remains extremely burdensome; debt indicators are significantly above thresholds of sustainability.",
    "External financing requirement for 1997 expected to be filled with bilateral and multilateral assistance, including debt relief under negotiation from non-Paris Club creditors.",
    "IMF membership and quota:",
    "Percent change",
    "Percent of GDP",
    "Months of imports",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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