Press Release No. 22/121

IMF Staff Completes Article IV Consultation 2022 Mission and the Third and Final Review of the Staff-Monitored Program to Guinea-Bissau

April 19, 2022

• Staff-level agreement with the authorities has been reached on the completion of the third and final review of the Staff-Monitored Program (SMP) approved in July 2021.
• Strong fiscal management remains essential to buttress debt sustainability and pave the way for negotiating an IMF lending arrangement.
• Medium-term sustained economic growth would benefit from additional governance reforms and diversification of production and export.

Washington, DC: An International Monetary Fund (IMF) mission led by Jose Gijon held virtual and on-site meetings with the authorities, from April 5 to April 20, 2022, and had discussions on the 2022 Article IV Consultations and the third and final review under a 9-month Staff-Monitored Program (SMP) approved by Management in July 2021. The mission aimed at taking stock of the efforts being undertaken to build a policy track record towards an Extended Credit Facility (ECF) arrangement. The discussions covered recent economic developments and the near and medium-term outlook and risks for Guinea-Bissau; implementation of policies and reforms to support more inclusive growth.

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

“The IMF team reached a staff-level agreement with the authorities on the completion of the third and final review of the SMP. This assessment is subject to IMF Management approval. Overall performance and progress on the reform program have been strong despite the challenges caused by the COVID-19 pandemic and rising commodity prices. Most quantitative targets assessed at end-December 2021 and structural benchmarks have been met.

“Guinea-Bissau’s economy has recovered from the Covid-19 pandemic. Growth is estimated to have accelerated to 5 percent in 2021 on the back of record cashew nut production, public investment in infrastructure, the gradual lifting of COVID containment measures, and a more stable political context. The outlook has become more uncertain given the potential impact of rising oil and food prices stemming from the war in Ukraine. Growth is projected to be around 3¾ percent in 2022. Inflation is projected to be above 5 percent and adversely affect the most vulnerable.

“Sustainable fiscal management is a priority. Recent fiscal consolidation needs to be pursued through 2022 in line with the 2022 budget objectives to contain the high risk of public debt distress. Combined with the successful conclusion of the SMP this would provide a strong backing to the authorities and help gathering donor support. It is also essential to create more room for spending on pro-growth areas such as health including vaccination, education, and physical infrastructure. The Mission welcomes the authorities’ determination to rein in the wage bill. It also underlines the necessity to mitigate large fiscal risks stemming from state-owned enterprises, which could erode debt sustainability.

“ Further addressing governance vulnerabilities will strengthen economic policy and business confidence. Ongoing reforms aim at enhancing public finance transparency, accountability and efficiency through enhanced domestic revenue and expenditure management. A critical governance reform of public finances is the gradual establishment of a Treasury Single Account. The government still has to implement the amended legal procurement framework approved by the Council of Ministers to ensure full transparency on the awarded public contracts, including the publication of beneficial ownership. The enforcement of the amended asset declaration regime once approved by Parliament, and the strengthening of resources for the audit court, the Financial Intelligence Unit and the public procurement authority could also be significant factors in enhancing governance.

“Economic diversification is key to boosting inclusive economic growth. The economy is excessively dependent on the production and export of cashew nuts, which leaves the country highly exposed to fluctuations in international prices and local weather conditions. Output and export diversification can contribute to higher and more sustainable growth. Opportunities lie in a range of areas such as agriculture, processing industries, natural resources, and tourism. Taking advantage of these opportunities requires addressing constraints that have hindered diversification to date. Actions include addressing human capital needs, improving the regulatory environment, encouraging financial deepening, removing infrastructural bottlenecks, and maintaining political stability.

“ The IMF team met with H.E. President Sissoco Embaló, Prime Minister Nabiam, Members of the Economic Commission of the National Popular Assembly, Vice-Prime Minister Sambú, Finance Minister Fadiá, Minister of Environment and Biodiversity Cassamá, Minister of Energy, Industry and Natural Resources Viegas, Minister of Public administration, Labor, Employment and Social Security Djaló, BCEAO National Director Embaló, President of the Court of Auditors Baldé. A seminar on macroeconomic challenges was chaired by the Vice-Prime Minister and attended by eight Ministers and Secretaries of State. The team met with officials from the Ministries of Finance, Economy, the National Directorate of the BCEAO, the National Institute of Statistics, the High Commission for COVID-19, the Financial Intelligence Unit and other officials. The team also met representatives from private sector associations and public sector enterprises, and from key bilateral and international partners. It visited the National Hospital Simão Mendes in Bissau.

“The team thanks the authorities for their openness, and constructive discussions and looks forward to continuous close cooperation paving the way to a possible Extended Credit Facility (ECF) arrangement in 2022.”

Key links:

Guinea-Bissau and the IMF