International Monetary Fund (IMF) Staff Reach Staff-Level Agreement on Third Review of the Extended Credit Facility Arrangement with Guinea Bissau

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IMF staff and the Guinea Bissau authorities have reached a staff-level agreement that could support the third review of the Extended Credit Facility (ECF) supported program, subject to approval by the IMF Executive Board. Upon completion of the review, Guinea Bissau will have access to an additional SDR [6.16] million (about US$ [8.1] million); Program performance has been mixed, reflecting a difficult economic and socio-political environment. Nonetheless, progress on the structural reforms continued to be strong; The new government is firmly committed to implementing the policies underpinning IMF-supported program. In this context, the authorities are seeking an augmentation of access under the ECF program amid the significant deterioration of Guinea-Bissau's terms of trade and a tightening of regional financing conditions.

A team from the International Monetary Fund (IMF) led by Jose Gijon, Mission Chief for Guinea Bissau, held virtual meetings during September 20–25, 2023, and meetings in Bissau during September 26– October 3, 2023, to discuss the Third Review of the ECF arrangement [1]. The initial arrangement was approved for a total amount of SDR 28.4 million (about US$ 37.9 million) on January 30, 2023.

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

“The mission team reached staff-level agreement with the authorities on economic and financial policies that could support the approval of the Third Review of the ECF program. This agreement is subject to approval by the IMF Executive Board, which is tentatively scheduled for [mid-November] 2023. The authorities are seeking an augmentation of access under the ECF program from 100 to 140 percent of quota. Upon completion of the Executive Board review, Guinea Bissau would have additional access to SDR [6.16] million (around US$ [8.1] million), bringing total disbursement under the arrangement to SDR [13.27] million (about US$ [17.4] million).

“The economy continues to recover in 2023, with growth projected to reach 4.2 percent, the same level as in 2022. Inflation remains high and is expected to average 8 percent in 2023, reflecting the surge in international food and fuel prices. The sharp decline of international cashew prices will also contribute to the widening of the current account deficit.

“Regarding program implementation, performance has been mixed in the context of a challenging economic and socio-political environment The floor on tax revenue was missed due to lower-than-expected cashew-related revenue. The ceiling on the wage bill was missed because of lower-than-expected savings from the census of public workers in 2022. The floor on a domestic primary balance was missed, reflecting a significant overrun of non-wage expenditure. While this includes one-off transfer to the public utility company and election related costs, a significant part of the overrun was due to security, sovereign, and force majeure expenditures. The government is implementing a series of corrective actions for these missed QPCs. The ceiling on external arrears was missed because of a late payment of external debt service.

“Progress on structural reforms continued to be strong. Two out of three “structural benchmarks” (SB) for end-June 2023 have been met. The authorities are requesting to postpone the approval of the medium-term staffing plan until March 2024 to align it with the 2024 budget. Besides, two of the three SBs due for end-September 2023 were met before the deadline. Regarding the continuous SB on the Technical Committee of Arbitration of Budgetary Expenditure (COTADO), it resumed its activities in September 2023 after the formation of the new government.

“Going forward, improving domestic revenue mobilization, and containing wage and non-wage current expenditures will be key to support fiscal consolidation and put public debt on a firm downward trajectory. Moreover, measures to mitigate fiscal risks, improve cash and debt management, and enhance governance will be crucial. Finally, additional financial support from the international community, through grants and concessional lending, remains key for the successful implementation of the IMF-supported program.

“The team thanks the authorities for their openness, and constructive discussions and looks forward to continuous close cooperation through the Extended Credit Facility (ECF) arrangement over the next reviews. The next visit is scheduled to take place in January 2024”.

“The IMF team met with H.E. President Sissoco Embaló, Prime Minister Martins, Minister of Economy and Finance Seidi, Minister of Public administration, Labor, and Modernization of the State Moreira, President of the National Assembly Pereira, BCEAO National Director Cassama, President of the Court of Auditors Baldé. The team met with officials from the Ministries of Economy and Finance, 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.”

Distributed by APO Group on behalf of International Monetary Fund (IMF).