Press Release No. 21/129

IMF Staff Completes Mission for a Staff-Monitored Program to Guinea Bissau

May 12, 2021

• The Staff-Monitored Program (SMP) will support the implementation of the authorities’ reform package which focuses on stabilizing the economy, managing the needs stemming from the COVID-19 pandemic, improving governance, and strengthening inclusive growth policies.
• Improved revenue mobilization and expenditure management are essential to ensure gradual fiscal convergence towards WAEMU standards and create fiscal space for much-needed public investment and social spending.
• Strengthening debt sustainability will require prudent fiscal policy avoiding non-concessional financing and putting public debt on a downward path. The IMF continues to support the authorities’ efforts to reach out to donors to mobilize concessional financing and grants to support reforms.

Washington, DC: The authorities have requested a 9-month Staff-Monitored Program (SMP) to support their efforts to restore macroeconomic stability, cope with the impact of COVID-19, lay the foundation for stronger and more inclusive growth, and mobilize external concessional financing. The SMP aims at building a track record toward a possible Extended Credit Facility (ECF) arrangement. An IMF mission led by Mr. Jose Gijon held virtual meetings with the authorities from April 28-May 12, 2021 to discuss their reform package.

At the end of the mission, Mr. Gijon issued the following statement:

“The Bissau Guinean authorities and International Monetary Fund (IMF) staff have reached a staff-level agreement on policies and reforms that can underpin an SMP, subject to approval by the IMF’s management. The program aims at gradually narrowing large macroeconomic imbalances that have been intensified by the impact of the COVID-19 pandemic, strengthening governance and social safety nets, and making progress towards more inclusive growth.

“The Bissau Guinean economy is facing severe social and economic challenges. The economy contracted by an estimated 1½ percent in 2020 and is projected to grow by about 3½ percent in 2021 as the COVID-19 pandemic still weighs significantly on the economy. The pandemic has given rise to balance of payments (BOP) needs. The fiscal deficit widened in 2020 reflecting weaker tax revenue and the authorities’ spending measures to deal with the pandemic; and public debt has increased.

“The IMF staff team recognizes the efforts taken by the authorities to skillfully manage the COVID-19 crisis in coordination with international partners in a context of very scarce resources.

“The team reached understandings on a reform agenda for 2021 and fiscal measures needed to ensure consistency of 2021 budget implementation with the SMP, avoid arrears accumulation and expensive non-concessional borrowing.

“The program includes revenue mobilization and expenditure containment measures—including the wage bill (projected to be about 65 percent of tax revenue in 2021)—to generate fiscal space for priority spending while ensuring debt sustainability.

“The SMP will assist the authorities in the improvement of the fiscal framework, through the development of a realistic public financial management strategy to enhance fiscal governance, transparency and accountability, including measures to strengthen expenditure control, tax and custom frameworks. It will also support the fight against corruption and mitigation of state-owned enterprises’ risks, all supported by IMF technical assistance.

“The team supports the authorities’ ongoing efforts to lower debt burden and welcomes their decision to join the Debt Service Suspension Initiative (DSSI). The authorities are encouraged to enhance control over external debt contracting.

“IMF staff will aim to continue playing a catalytic role and will also support the authorities’ efforts to reach out to other international partners to mobilize adequate concessional financing for the reform program.

“The IMF team met with H.E. President Sissoko Embaló, Prime Minister Nabiam, Vice-Prime Minister Sambú, Finance Minister Fadia, BCEAO National Director Embalo, Minister of Economy Mandinga, Minister of Public Administration Balde, High Commissioner for COVID-19 Robalo, and Mr. Djaló, President of the Commission for Economic Affairs of the National Assembly. The team also met with officials from the Ministries of Finance, Economy, Public Administration, the National Direction of the BCEAO, the National Institute of Statistics, the FIU and other officials. In addition, the team met representatives from development partners.

“The team thanks the authorities for their openness, and constructive discussions and looks forward to continuing close cooperation in the period ahead.”