Press Release No. 24/407

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

November 7, 2024

• The IMF and Guinea Bissau have reached staff-level agreement on economic policies that could support the Seventh 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.
• Program performance has been strong as the authorities met eight of the nine quantitative performance criteria for end-June 2024. Structural reforms are progressing well especially in the energy sector.
• Growth is expected to reach 5 percent in 2024 while inflation should average 4.2 percent. The authorities remain committed to achieving a fiscal deficit of 3 percent of GDP in 2025, in line with the WAEMU target. However, the economic outlook remains subject to significant downside risks.

Bissau: A team from the International Monetary Fund (IMF) led by Niko Hobdari, Mission Chief for Guinea Bissau, held meetings in Bissau during October 29 - November 6, 2024 to discuss macroeconomic policies in the context of the Seventh 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. Hobdari 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 Seventh Review of the ECF program. Conclusion of the Review by the IMF Executive Board, tentatively scheduled for mid-December 2024, would enable the disbursement of SDR 5.43 million (about US$ 7.2 million), bringing total disbursement under the arrangement to SDR 30.31 million (about US$ 40.4 million).

“Growth is expected to reach 5 percent in 2024 despite lower-than-expected cashew exports while inflation is projected to average 4.2 percent this year. The current account deficit will be larger-than-expected at 7.4 percent of GDP due to the underperformance in cashew exports. The fiscal deficit is projected to reach 5 percent of GDP in 2024 and the authorities remain committed to achieving a fiscal deficit of 3 percent of GDP in 2025, in line with the WAEMU target.

“In this context, the authorities’ economic and financial program is on track and its implementation has been strong. Eight of the nine quantitative performance criteria (QPC) for end-June 2024 and all indicative targets (IT) have been met. All three structural benchmarks (SB) for June 2024 and three SBs for September 2024 were met, while one was completed with a slight delay.

“Since August 2024, the city of Bissau has been supplied with electricity solely by the OMGV hydropower plant at much lower tariffs than the previous provider, and the authorities intend to expand rapidly domestic electricity production, including through solar plants. This diversification of sources of power is a critical milestone of energy sector reforms and will support robust and sustainable economic growth over the near and medium term.

“Looking ahead, advancing key structural reforms will support inclusive growth and economic diversification. These include the reform strategy for the energy sector with a focus on shifting towards renewable sources, encouraging domestic cashew processing, fostering the tourism sector, and empowering women and the youth. Improving domestic revenue mobilization, strengthening expenditure controls, and seeking grants and loans on highly concessional terms will be key to maintain fiscal sustainability. The authorities should also persevere with reforms to mitigate fiscal risks from state-owned enterprises and improve cash and debt management. The economy remains subject to important near-term risks, including a challenging socio-political climate and capacity constraints.

“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 Energy Casimiro, 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.