An International Monetary Fund (IMF) team 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.
At the end of the visit, Mr. Rasmussen issued the following statement:
“Guinea-Bissau’s economy came under pressure in 2018. Economic activity
suffered from lower cashew production and prices. Cashew exports declined
by about 25 percent and 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. Notably,
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.
“The draft budget for 2019 aims to consolidate public finances. It targets
increased revenue and modest expenditure growth to bring the deficit below
3 percent of GDP, in line with the WAEMU criterion. The higher revenue is
supported by steps to strengthen administration, including the recent
passage of two new tax laws and reform of the customs brigade, as well as
collection of stamp duty on air transport and adjustment of some tax rates.
“The push to strengthen public finances is welcome though meeting the
envisioned targets will require tight fiscal discipline 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 another pressure point, reflecting 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 in maintaining a healthy financial
sector.
“The IMF remains committed to supporting good economic governance in
Guinea-Bissau. The mission will not at this point conclude discussions on
the pending sixth review of the ECF program but expects to return to Bissau
as soon as possible after the legislative elections for discussions with
the incoming government.
“The IMF mission wishes to express its gratitude to the authorities for the
constructive discussions and for their warm hospitality.”
The team met with President José Mário Vaz, Prime Minister and Minister of
Finance Aristides Gomes, Public Prosecutor General Bacari Biai, Central
Bank of West African States (BCEAO) National Director Helena Nosolini
Embaló, other high-level officials, and representatives of the private
sector and the donor community.
