Press Release No. PR24/475

IMF Executive Board Completes the Seventh Review under the Extended Credit Facility Arrangement for Guinea-Bissau and Approves US$7.1 Million Disbursement

December 16, 2024

• The IMF Executive Board today completed the seventh review under the Extended Credit Facility (ECF) arrangement for Guinea-Bissau. This decision allows for an immediate disbursement of SDR5.43 million (about US$7.1 million) to help meet the country’s financing needs.
• Program performance was strong relative to the quantitative targets and broadly satisfactory as regards structural reforms. All nine quantitative performance criteria and all three structural benchmarks for end-June 2024 were met. Specifically, significant progress was made with regard to energy sector reforms.
• Growth is expected to reach 5 percent in 2024 while inflation should average 4.2 percent. 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. However, the economic outlook remains subject to significant downside risks.

Washington, DC – December 16, 2024 : The Executive Board of the International Monetary Fund (IMF) completed today the seventh review under Guinea-Bissau’s Extended Credit Facility (ECF) arrangement. The three-year arrangement, approved on January 30, 2023, aims to secure debt sustainability, improve governance, and reduce corruption while creating fiscal space for inclusive growth. The Executive Board granted an augmentation of access (140 percent of quota or SDR 39.76 million) on November 29, 2023.

The completion of the seventh review enables the disbursement of SDR 5.43 million (about US$7.1 million) to help meet the country’s balance-of-payments and fiscal financing needs. This brings total disbursement under the arrangement to SDR 30.31 million (about US$39.9 million). Program performance was strong relative to the quantitative targets and broadly satisfactory as regards structural reforms. All nine Quantitative Performance Criteria and all three Structural Benchmarks for end-June 2024 were met. The authorities have also met the two continuous Structural Benchmarks on the expenditure committee (COTADO) and debt service payments. In completing the seventh review, the Executive Board approved the authorities’ request for modification of performance criteria and completed the financing assurance review.

Growth is expected to reach 5 percent in 2024 despite lower-than-expected cashew exports while inflation is projected to average 4.2 percent. The current account deficit will be larger than projected earlier 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. However, the economy remains subject to significant downside risks in the context of a challenging socio-political climate and capacity constraints.

At the conclusion of the Executive Board’s discussion, Mr. Li, Deputy Managing Director and Acting Chair, made the following statement:

“Guinea-Bissau continues to face a complex economic and political landscape. The recent decline in cashew nut exports has added pressure on the balance of payments and fiscal revenues. Moreover, the tight financial conditions in the region have led to higher borrowing costs, further affecting the country’s external position and government financing. In the face of these challenges, the authorities have fostered consensus on essential reforms while upholding political and macroeconomic stability. Their commitment to implementing the reforms and policies outlined in their Fund-supported program is vital for ensuring debt sustainability, maintaining macroeconomic stability, and addressing developmental needs.

“The economy remains resilient, and program performance remains strong. It is commendable that the authorities have pursued ambitious revenue measures and stringent expenditure controls to achieve fiscal consolidation targets, even in the face of declining cashew revenues due to stagnating export prices and weather shocks.

“Achieving the fiscal consolidation targets for 2024 and 2025 is essential to achieve program objectives and reduce public debt vulnerabilities. In particular, it will be important to maintain strict controls over the wage bill and tighten controls of other expenditures through the expenditure committee (COTADO) to prevent spending overruns. Revenue mobilization efforts should focus on reducing tax exemptions and strengthening revenue administration. Securing fiscal space for priority social spending is also essential. These efforts should be accompanied by a strengthened debt management and a prudent borrowing strategy.

“The authorities are advancing structural reforms that are critical to the successful implementation of the program. Actions have been undertaken to mitigate fiscal risks associated with the public utility company, thereby helping restore its cost recovery. Furthermore, the authorities have made progress toward disengaging from the undercapitalized bank, which would enhance overall financial stability. Additional efforts are needed on governance and transparency reforms as well as on economic diversification, which are critical to boost sustainable and inclusive growth.”