Press Release No. 09/224

Press Release: IMF Executive Board Approves US$ 2.737 Million Purchase Under Emergency Post-Conflict Assistance for Guinea-Bissau

June 19, 2009

The Executive Board of the International Monetary Fund (IMF) has approved a purchase in an amount equivalent to SDR 1.775 million (about US$ 2.737 million) under the Emergency Post-Conflict Assistance (EPCA). The assistance supports the authorities' 2009 economic program and is the third purchase under the EPCA. The Executive Board approved previous purchases under EPCA on January 28, 2008 (see Press Release No. 08/11) and July 28, 2008 (see Press Release No. 08/183).

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 June 19, 2009, Murilo Portugal, Deputy Managing Director and Acting Chair, said:

“Guinea-Bissau continues to face an extremely difficult economic and fiscal situation. Some progress was made during the 2008 EPCA-supported program in reforming fiscal management, but global economic developments, especially lower demand and prices for exports, are expected to slow growth significantly and put pressure on the balance of payments and an already tight fiscal situation.

“The authorities’ program for 2009 appropriately focuses on stabilizing public finances and avoiding new domestic arrears by keeping current spending strictly within available domestic and external resources. Clearing the stock of domestic arrears is also important, but will need to be based on a thorough external audit and the availability of additional concessional external assistance.

“Recent progress on structural reforms to strengthen fiscal management is encouraging, and demonstrates that the authorities have the capacity to implement the proposed program. At the same time, the pace of fiscal reforms needs to accelerate to further build capacity and improve confidence in the economy. Planned measures under the 2009 program include a medium-term action plan for public financial management and further strengthening customs administration and control of territorial waters.

“Strong engagement of the international community is essential for the success of the EPCA-supported program. In light of Guinea Bissau’s debt burden, donor assistance should be on highly concessional terms, preferably grants. The authorities must remain steadfast in their efforts to improve governance and strengthen institutional capacity.

“Satisfactory performance under the EPCA-supported program could pave the way for a PRGF arrangement and eventual debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI)”, said Mr. Portugal.