Press Release: IMF Executive Board Approves Three-Year US$23.9 million Extended Credit Facility Arrangement for Guinea-Bissau and Concludes 2015 Article IV Consultation
July 10, 2015
Press Release No. 15/331July 10, 2015
The Executive Board of the International Monetary Fund (IMF) today approved a three-year SDR 17.04 million (about US$23.9 million, 120 percent of quota) arrangement under the Extended Credit Facility (ECF)1 for Guinea-Bissau and also concluded the 2015 Article IV consultation.2 The approval enables the immediate disbursement of an amount equivalent to SDR 2.84 million (about US$4.0 million, 20 percent of Guinea Bissau’s quota).
The authorities’ program, which is anchored on the government’s Strategic Plan for 2014–18, aims to consolidate the fiscal position through better expenditure management and enhanced revenue mobilization, deepen institutional reforms, mitigate vulnerabilities, and develop the private sector to support growth and job creation. The program focuses on improving the policy framework by addressing governance and security issues, strengthening budgetary transparency as well as public investment and debt management, and improving compilation of statistics.
Following the Executive Board discussion on Guinea-Bissau, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, made the following statement:
“Guinea-Bissau’s new government has taken important steps to foster political stability and resume stalled reforms. The authorities’ economic program involves appropriately ambitious goals, notably strengthening the fiscal position, safeguarding financial stability, and improving the business environment. Nonetheless, the challenges ahead remain significant, and include an underfunded security sector reform, significant infrastructure gaps, and widespread poverty. The success of the program hinges on a satisfactory implementation of the authorities’ policy commitments, broad popular support, and continued assistance from Guinea-Bissau’s development partners.
“The authorities’ focus on fiscal reforms to improve budget execution and public financial management is welcome. Enhancing revenue mobilization will be important to create fiscal space for badly needed infrastructure and social spending. An effective debt management calls for a prompt upgrade of current practices and continued reliance on concessional borrowing.
“The authorities’ decision not to deploy scarce public resources to shore up troubled banks is in line with international best practice and welcomed. Safeguarding financial stability calls for heightened supervisory vigilance in the period ahead as well as closer collaboration with the WAEMU Banking Commission.
“Structural reforms will be necessary to promote economic diversification and more inclusive growth. Stepped up efforts to improve the business environment, including broader access to financial services, should boost Guinea-Bissau’s competitiveness and help reduce poverty. A bold overhaul or closure of the fund to promote agricultural development, in line with the findings from an audit underway, could pave the way for vigorous private sector development in a key sector.”
The Board also completed the 2015 Article IV consultation with Guinea-Bissau.
In November 2014, the IMF approved support for Guinea-Bissau under the Rapid Credit Facility to meet balance of payments financing needs and to catalyze additional development partner support. Since then, the newly-elected government has taken action to confront the country’s economic and social challenges, and development partner support has been re-kindred. The authorities instituted quick-win measures, including the setting up of a Treasury management committee and diverse measures to enhance domestic revenue mobilization. To mobilize development partner support for their Strategic Plan, the government organized a donor roundtable in Brussels in March this year, which yielded significant pledges from development partners.
Economic growth recovered in 2014, consumer price inflation declined, and external balances improved while the fiscal position deteriorated slightly.
Executive Board Assessment3
Executive Directors commended the authorities for their determination to foster political and macroeconomic stability. However, noting that Guinea-Bissau still faces significant socio-economic challenges, Directors emphasized the need for continued strong commitment to prudent policies and comprehensive reforms. They agreed that the resumption of financial support from development partners will be critical to improving the country’s economic prospects and reducing poverty.
Directors emphasized the importance of fiscal discipline and efficient public spending. They encouraged sustained efforts to strengthen revenue mobilization and create additional fiscal space to address Guinea-Bissau’s vast development shortfalls. In particular, Directors highlighted the need to strengthen public financial management, notably budget execution processes. They also called for continued progress with security sector reform.
Directors emphasized the importance of securing a sustainable fiscal position by seeking financing on highly-concessional terms. Prudent borrowing will be essential in the light of Guinea-Bissau’s large public investment plans and its vulnerability to shocks.
Directors agreed that financial sector stability is critical for growth. In this regard, they encouraged the authorities to reinforce the banking system especially by strengthening bank oversight and addressing non-performing loans. Steps to promote financial deepening in collaboration with the relevant monetary union institutions will also be important.
Directors stressed that structural reforms are necessary to bolster competitiveness and achieve diversified and inclusive growth. They agreed that, in order to boost private sector activity, priority should be given to enhancing the business environment, and improving infrastructure and access to financial services. Directors welcomed the audit of the fund to promote agricultural development, and encouraged the authorities to overhaul its governance and operations in light of the findings.
Directors stressed the importance of improving the quality and timeliness Guinea-Bissau’s economic statistics. They encouraged the authorities to improve coordination among the various institutions involved in data production and ensure that adequate resources are allocated to them.
| Guinea-Bissau: Selected Economic Indicators, 2012–20 | ||||||||||||||||||||
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Population (million) |
1.7 |
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Quota (current, million SDR; % total) |
14.2 (0.01 percent) |
Per capita GDP (2014 $) |
639 |
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Main products and exports |
Cashew nuts are about 90 percent of exports |
Literacy / Poverty Rate |
55/69.3 |
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Key export markets |
India and Europe |
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| 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | ||||||||||||
| RCF | Prelim. | RCF | Proj. | Proj. | ||||||||||||||||
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| (Annual percentage change, unless otherwise indicated) | ||||||||||||||||||||
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National accounts and prices |
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Real GDP at market prices |
-1.8 | 0.8 | 2.5 | 2.5 | 4.0 | 4.7 | 4.8 | 5.0 | 5.0 | 5.0 | 5.0 | |||||||||
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Real GDP per capita |
-4.0 | -1.4 | 0.3 | 0.3 | 1.7 | 2.4 | 2.5 | 2.7 | 2.7 | 2.7 | 2.7 | |||||||||
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GDP deflator |
-0.8 | -1.0 | 3.7 | 5.4 | 2.8 | 5.9 | 1.8 | 2.3 | 2.7 | 2.8 | 2.9 | |||||||||
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Consumer price index (annual average) |
2.1 | 0.8 | -0.8 | -1.0 | 3.3 | 1.3 | 2.3 | 2.7 | 3.0 | 3.0 | 3.0 | |||||||||
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External sector |
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Exports, f.o.b. (based on US$ values) |
-44.8 | 16.3 | 14.8 | 12.7 | 4.9 | 13.1 | 7.2 | 5.2 | 5.5 | 5.6 | 5.7 | |||||||||
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Imports, f.o.b. (based on US$ values) |
-24.4 | 0.6 | 26.2 | 24.7 | 4.2 | 7.9 | 10.4 | 8.7 | 8.1 | 10.1 | 10.6 | |||||||||
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Export volume |
-27.2 | 18.6 | -9.3 | -1.4 | 4.9 | 8.7 | 5.0 | 2.0 | 2.3 | 2.3 | 2.3 | |||||||||
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Import volume |
-26.0 | 1.5 | 30.9 | 30.9 | 7.4 | 26.1 | 9.8 | 6.7 | 6.9 | 9.6 | 10.4 | |||||||||
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Terms of trade (deterioration = -) |
-29.7 | -20.1 | 30.2 | 31.4 | 3.0 | 24.5 | -0.3 | 0.7 | 1.3 | 2.0 | 2.4 | |||||||||
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Real effective exchange rate (depreciation = -) |
4.9 | -7.6 | … | … | … | … | … | … | … | … | ||||||||||
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Nominal exchange rate (CFAF per US$; average) |
510.2 | 493.9 | … | 493.5 | … | … | … | … | … | … | ||||||||||
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Government finances |
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Domestic revenue (excluding grants) |
-12.5 | -10.6 | 39.5 | 59.4 | -0.6 | 17.1 | 17.9 | -2.1 | 9.8 | 9.8 | 9.8 | |||||||||
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Domestic revenue (excluding grants and one-offs) |
-12.5 | -10.6 | 26.0 | 47.7 | 10.0 | 20.9 | 9.5 | 10.1 | 9.8 | 9.8 | 9.8 | |||||||||
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Total expenditure |
-26.4 | -2.1 | 58.2 | 86.4 | -3.3 | -3.1 | 14.5 | 5.3 | 6.8 | 8.9 | 9.1 | |||||||||
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Current expenditure |
8.5 | -20.1 | 58.6 | 75.8 | -6.8 | -3.8 | 5.4 | 5.6 | 5.9 | 8.6 | 8.3 | |||||||||
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Current expenditure (excluding elections-related spending) |
8.5 | -20.1 | 41.9 | 57.2 | 5.6 | 7.6 | 5.4 | 5.6 | 5.9 | 8.6 | 8.3 | |||||||||
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Capital expenditure |
-80.4 | 152.9 | 57.1 | 115.4 | 6.5 | -1.7 | 34.0 | 4.9 | 8.3 | 9.5 | 10.5 | |||||||||
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Money and credit |
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Net domestic assets 1 |
14.0 | 8.4 | -1.1 | -4.2 | 7.3 | -6.9 | -7.9 | -5.7 | -3.2 | -2.6 | 0.4 | |||||||||
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Credit to government (net) |
11.3 | 0.3 | 8.2 | 0.5 | 0.0 | 1.8 | -0.6 | 0.0 | 0.0 | 0.0 | 0.0 | |||||||||
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Credit to the economy |
7.9 | 1.4 | 2.2 | -2.9 | 2.4 | 2.7 | 2.7 | 3.0 | 3.1 | 3.2 | 3.3 | |||||||||
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Velocity (GDP/broad money) |
3.1 | 2.7 | 2.5 | 2.2 | 2.4 | 2.2 | 2.2 | 2.1 | 2.1 | 2.1 | 2.1 | |||||||||
| (Percent of GDP, unless otherwise indicated) | ||||||||||||||||||||
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Investments and savings |
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Gross investment |
7.3 | 7.0 | 7.1 | 10.8 | 7.1 | 11.7 | 13.1 | 12.9 | 12.9 | 13.1 | 13.3 | |||||||||
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Of which: government investment |
2.1 | 3.1 | 1.9 | 7.2 | 1.9 | 6.4 | 8.0 | 7.8 | 7.8 | 7.9 | 8.1 | |||||||||
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Gross domestic savings |
-3.9 | -0.7 | -2.7 | 1.1 | -2.7 | 1.3 | 1.9 | 1.1 | 0.8 | 0.2 | -0.5 | |||||||||
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Of which: government savings |
-2.6 | -2.2 | -8.0 | -4.0 | -6.8 | -1.2 | 0.2 | -0.8 | -0.3 | -0.1 | 0.0 | |||||||||
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Gross national savings |
-1.5 | 2.7 | 6.7 | 9.6 | 3.2 | 8.1 | 8.4 | 7.4 | 6.9 | 5.9 | 4.8 | |||||||||
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Government finances |
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Total revenue2 |
9.1 | 8.1 | 11.4 | 12.0 | 10.6 | 12.6 | 14.0 | 12.7 | 13.0 | 13.2 | 13.4 | |||||||||
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Total domestic primary expenditure |
12.3 | 9.7 | 15.3 | 15.5 | 18.4 | 13.0 | 13.8 | 13.1 | 13.2 | 13.2 | 13.2 | |||||||||
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Domestic primary balance |
-3.3 | -1.6 | -3.9 | -3.5 | -7.8 | -0.3 | 0.1 | -0.4 | -0.3 | 0.0 | 0.2 | |||||||||
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Overall balance (commitment basis) |
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Including grants |
-2.2 | -1.8 | -1.8 | -2.2 | -3.5 | -1.5 | -1.8 | -2.4 | -1.8 | -1.6 | -1.4 | |||||||||
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Excluding grants |
-4.6 | -5.3 | -10.0 | -11.2 | -8.7 | -7.6 | -7.7 | -8.6 | -8.1 | -8.1 | -8.1 | |||||||||
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External current account (including official current transfers) |
-8.8 | -4.4 | -0.4 | -1.2 | -3.9 | -3.6 | -4.7 | -5.5 | -6.0 | -7.2 | -8.6 | |||||||||
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Excluding official transfers |
-10.6 | -5.1 | -6.7 | -5.4 | -6.8 | -5.3 | -6.3 | -7.1 | -7.6 | -8.9 | -10.3 | |||||||||
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Nominal stock of public debt |
47.3 | 49.7 | 51.9 | 49.6 | 48.2 | 47.5 | 45.3 | 43.3 | 41.3 | |||||||||||
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Of which: external debt |
17.9 | 16.5 | 17.2 | 18.0 | 16.6 | 15.9 | 16.2 | 16.8 | 17.5 | |||||||||||
| (US$ millions, unless otherwise indicated) | ||||||||||||||||||||
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Memorandum item: |
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Nominal GDP at market prices (CFAF billions) |
508.3 | 507.2 | 504.5 | 548.4 | 539.5 | 608.0 | 648.5 | 696.5 | 750.9 | 810.5 | 875.5 | |||||||||
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Sources: Guinea-Bissau authorities; and IMF staff estimates and projections. |
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1 Contribution to the growth of broad money in percent. |
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2 One-off revenues amounted to 0.9 percent of GDP in 2014 (due to FUNPI's proceeds being transferred to the Treasury) and are expected to account for 0.5 percent of GDP in 2015 (due to the selling of 3G licenses) and 1.6 percent of GDP in 2016 (mostly due to revenue from the selling of seized illegal wood and the collection of associated taxes). |
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1 The ECF provides financial assistance to all countries eligible for support under the Fund’s Poverty reduction and Growth Trust (PRGT), and who have protracted balance of payments problems (i.e. when the resolution of the underlying macroeconomic imbalances would be expected to extend over the medium to long term). It supports the countries’ economic programs aimed at moving toward a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. Access to ECF financing is determined on a case-by-case basis, taking into account the country’s balance of payments need and strength of its economic program, and is guided by access norms. Financing under the ECF carries a zero interest through end-2016, has a grace period of 5½ years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities under the PRGT every two years, with the next review expected to take place in end-2016. 2 Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. 3 At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/eternal/np/sec/misc/qualifiers.htm. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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