Press Release No. 08/11

Press Release: IMF Executive Board Approves US$2.8 Million in Emergency Post-Conflict Assistance for Guinea-Bissau

January 29, 2008

The Executive Board of the International Monetary Fund (IMF) today approved an amount equivalent to SDR 1.775 million (about US$2.8 million) in Emergency Post-Conflict Assistance (EPCA) for Guinea-Bissau. The assistance supports the authorities' program for 2008 and is intended to help the country address the immediate post-conflict challenges of restoring fiscal stability, building capacity for implementing policy, and regularizing relations with donors.

Emergency Post-Conflict Assistance 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 is a key part of a concerted international effort to provide financial assistance to Guinea-Bissau.

Following the Executive Board's discussion of Guinea-Bissau, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, stated:

"The Guinea-Bissau authorities face enormous post-conflict economic challenges. The new government appointed in April 2007 has been implementing an emergency program to correct large, unsustainable fiscal imbalances. As a result, fiscal performance improved in the second half of 2007 and donor disbursements have resumed.

"The authorities' economic program for 2008, which is supported under the IMF's Emergency Post-Conflict Assistance, builds on these recent gains. The program seeks to lay the foundation for achieving medium-term fiscal and debt sustainability and normalizing relations with external creditors by reining in nonpriority current spending and intensifying revenue mobilization. The authorities recognize that the spending plan is tight, but they are committed to keeping expenditures within available financing. Given the large wage bill, the authorities consider wage restraint and reform of the civil and military services to be critical for successful fiscal management.

"The 2008 program includes a few structural measures that focus on building capacity in critical areas of revenue administration and public expenditure management. These measures will help to improve fiscal transparency, restore confidence, and boost donor support.

"Given the large external debt burden, Guinea Bissau will require continued and increased access to grants and concessional aid inflows over the medium term. The authorities have already secured a significant amount of donor financial and technical assistance for 2008. Good performance on the 2008 program could catalyze additional donor support for critical structural reforms and priority spending, which would reduce the reliance on domestic borrowing.

"Satisfactory implementation of the 2008 program could pave the way for a successor program supported under the IMF's Poverty Reduction and Growth Facility, and for debt relief under the Heavily Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative," Mr. Portugal said.