Press Release: IMF Executive Board Completes Third and Financing Assurances Review Under ECF with Guinea-Bissau and Approves US$3.77 Million Disbursement
December 5, 2011Press Release No. 11/438
December 5, 2011
The Executive Board of the International Monetary Fund (IMF) completed on December 2 the third and financing assurances review of Guinea-Bissau’s economic performance under a program supported by the Extended Credit Facility (ECF). The Board’s decision enables the immediate disbursement of an amount equivalent to SDR 2.414 million (about US$3.77 million), bringing total disbursements under the arrangement to an amount equal to SDR 15.123 million (about US$23.6 million).
The three-year Extended Credit Facility for Guinea-Bissau in the amount of SDR 22.365 million was originally approved by the IMF Executive Board in May 2010 (see Press Release No. 10/185). The authorities’ economic program aims at helping the country move towards fiscal and debt sustainability, as well as achieving stronger economic growth and poverty alleviation.
Following the Executive Board’s approval of the arrangement with Guinea-Bissau, Mr. Min Zhu, Deputy Managing Director and Acting Chair, issued the following statement:
“Guinea-Bissau authorities are to be commended for their satisfactory performance under the Extended Credit Facility-supported program. Economic growth has been buoyant, benefitting from a good cashew harvest and strong terms of trade, and backed by continued prudent macroeconomic policies and implementation of structural reforms. The economic outlook for 2012 is broadly positive, but the economy remains vulnerable. Uncertainties in advanced economies pose risks, and domestically, sustaining growth will require continued political stability, effective governance, and further progress in structural reforms.
“Achieving Guinea-Bissau’s economic objectives calls for a prudent fiscal policy that keeps spending within available resources, mobilizes more revenues, protects priority spending, and preserves resources for contingencies. To ensure adequate budget execution, it will be critical that the authorities follow through with revenue-enhancing measures, particularly through eliminating implicit subsidies, modernizing tax administration, and tightening controls in customs. For the first time in recent years, fiscal revenues in the 2012 budget will be sufficient to cover current expenditures, so all budgetary assistance can be used to support spending on infrastructure and other capital investments.
“Going forward, it will be important that the authorities accelerate broad-based economic reforms aimed at fostering confidence and facilitating macroeconomic management. The authorities’ new poverty reduction strategy is appropriately ambitious. This will require careful project selection, program prioritization, and broad support from development partners. The program of economic reforms for 2012 is aligned with the strategy, and in the area of public financial management it focuses on improving revenue mobilization, strengthening customs administration, and putting in place better debt management capacity.
“Guinea-Bissau’s external position has improved markedly following the Heavily Indebted Poor Countries’ Initiative completion point. Strengthening debt management capacity as well as limiting recourse to external financing to concessional loans will help safeguard this gain,” added Mr. Zhu.