Press Release No. 08/183

Press Release: IMF Executive Board Approves US$2.9 Million Disbursement Under Emergency Post-Conflict Assistance for Guinea-Bissau

July 28, 2008

The Executive Board of the International Monetary Fund (IMF) has approved a disbursement in an amount equivalent to SDR 1.775 million (about US$2.9 million) under the Emergency Post-Conflict Assistance (EPCA) for Guinea-Bissau approved on January 28, 2008 (see Press Release No. 08/11). The assistance supports the authorities' 2008 economic program and is the second and final purchase under the EPCA.

EPCA is designed to promote a strengthening of administrative and institutional capacity, which will be necessary to sustain economic recovery and a higher level of financial assistance. The IMF's support through EPCA formed a key part of a concerted international effort to provide financial assistance to Guinea-Bissau.

Following the Executive Board's discussion of Guinea-Bissau's performance under the EPCA-supported program on July 25, 2008, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, said:

"Guinea-Bissau's has made significant progress in macroeconomic stabilization and structural reforms, in an adverse external environment. Meeting the challenges resulting from sharp increases in international food and fuel prices will require continued efforts to maintain macroeconomic stability, strengthen institutional capacity, and boost production, particularly in the agricultural sector.

"The reduction in tariffs on rice and fuel imports to address the social consequences of price increases was appropriate in light of capacity constraints. However, meeting fiscal objectives for 2008 will depend on steps to offset the impact of these measures on the budget, including the comprehensive implementation of the targeted revenue and expenditure policies. The timely payment of civil servant wages is also important. Strong policy implementation would enhance prospects for the timely disbursement of external concessional assistance, and help support the authorities' efforts to avoid further recourse to high-cost borrowing from commercial banks and the accumulation of new domestic arrears.

"Recent progress on structural reforms to strengthen fiscal management is welcome. The authorities are encouraged to continue to strengthen expenditure management, including by ensuring that all expenditure commitments are promptly regularized. At the same time, the pace of fiscal reforms needs to accelerate to further build capacity and improve confidence in the economy. Planned additional measures under the program include improvements in import processing and customs administration and a further strengthening of treasury management.

"Continued strong engagement of the international community along with strong policy implementation will be essential for the success of the EPCA-supported program. In light of Guinea Bissau's debt burden, the authorities should seek assistance from donors on highly concessional terms, preferably grants," Mr. Portugal said.

For additional information on emergency assistance by the IMF, see: http://www.imf.org/external/np/exr/facts/conflict.htm