Press Release No. 24/236

IMF Reaches Staff-Level Agreement with Guinea Bissau on Sixth Review of Extended Credit Facility Arrangement

June 25, 2024

• The IMF and Guinea Bissau have reached staff-level agreement on economic policies that could support the sixth review of the Extended Credit Facility (ECF). Once the review is approved by IMF Management and completed by the IMF Executive Board, Guinea Bissau will have access to about US$ 7.2 million.
• The authorities’ commitment to a range of difficult policy reforms is starting to show some results. They should persevere with their ambitious structural reform agenda to improve domestic revenue mobilization, strengthen expenditure controls, and improve governance.
• Economic growth is expected to be around 5 percent in 2024, while inflation should slow to 4.2 percent compared to 7.2 percent in 2023. However, the economic outlook remains subject to significant downside risks.

Bissau: A team from the International Monetary Fund (IMF) led by Jose Gijon, Mission Chief for Guinea Bissau, held videoconferences and meetings in Bissau from June 12 to June 24, 2024, to discuss macroeconomic policies in the context of the Sixth Review of the ECF arrangement [[1]]. This staff-level agreement is subject to IMF Management approval and Executive Board consideration. The initial arrangement was approved by the IMF Executive Board for a total amount of SDR 28.4 million (about US$ 37.3 million) on January 30, 2023. The IMF Executive Board granted an augmentation of access (140 percent of quota or SDR 39.76 million) on November 29, 2023.

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

“I am pleased to announce that the Guinea Bissau authorities and the IMF staff have reached a staff-level agreement on economic and financial policies that could support the approval of the Sixth Review of the ECF program. Conclusion of the Review by the IMF Executive Board, tentatively scheduled for end-August 2024, would enable the disbursement of SDR 5.44 million (about US$ 7.2 million), bringing total disbursement under the arrangement to SDR 24.88 million (about US$ 32.7 million).

“Growth is expected to be around 5 percent in 2024 and inflation should decline significantly from last year to reach 4.2 percent. The current account deficit is expected to narrow and reach 6.1 percent of GDP. The authorities remain committed to achieving the domestic primary deficit target of 1.2 percent of GDP in 2024 in order to put public debt on a firm downward trajectory.

“In this context, the authorities’ economic and financial program is on track and its implementation has been satisfactory. At least seven of the nine quantitative performance criteria (QPC) for end-April 2024 have been met, and six structural benchmarks (SB) have been completed of which three in advance of their test dates. The QPC on external payment arrears was missed because of two delayed payments of external debt service that ran into arrears in January and May 2024. The continuous SB on the Technical Committee of Arbitration of Budgetary Expenditure (COTADO) was not met between March and May 2024 as some expenditures were not authorized by the committee during these months. The continuous SB on debt service payments was also not met between February and May 2024. The authorities are taking corrective actions for these missed SBs.

“The authorities’ commitment to a range of difficult policy reforms is starting to show some results, but the economy remains subject to important near-term risks, including a challenging socio-political climate and capacity constraints. The authorities should persevere with their ambitious structural reform agenda to improve domestic revenue mobilization, strengthen expenditure controls, and improve governance. Moreover, mitigating fiscal risks from State-Owned enterprises and improving cash and debt management will be critical to maintain macroeconomic stability and attain program objectives. Political stability as well as continued support from the international community will be crucial.

“The team would like to thank the authorities for their openness, productive discussions, and excellent cooperation.

“The IMF team met with H.E. President Sissoco Embaló, Prime Minister Barros, Minister of Finance Te, Minister of Economy, Planning and Regional Integration Sambu, Minister of Public Administration, Labor, Vocational Training and Social Security Hijazy, and BCEAO National Director Cassama. The team met with officials from the Ministries of Finance, Economy, Agriculture, Fisheries, Justice, Public Health, the National Directorate of the BCEAO, the National Institute of Statistics, the Financial Intelligence Unit, the procurement authorities, and other officials. The team also met with representatives of public sector enterprises, as well as key bilateral and international partners.”

Key links:

Guinea-Bissau and the IMF

[1] The Extended Credit Facility (ECF) provides financial assistance to countries with protracted balance of payments problems. It supports countries’ economic programs aimed at moving toward a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. The ECF may also help catalyze additional foreign aid.