A team from the International Monetary Fund (IMF) led by Jose Gijon, Mission Chief for Guinea Bissau, held virtual meetings during March 8–13, 2023, and meetings in Bissau during March 14–20, 2023, to discuss the assessment of the First Review of the Extended Credit Facility (ECF) arrangement [1]. The 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 first review of the ECF-supported program. This agreement is subject to approval by the IMF Executive Board, which is tentatively scheduled for May 2023. Upon completion of the Executive Board review, Guinea Bissau would have access to SDR 2.37 million (around US$ 3.16 million), bringing the total IMF financial support disbursed under the arrangement to SDR 4.74 million (about US$ 6.32 million).

“In the context of a very complex economic environment, the review focused on assessing progress in program implementation, updating the macroeconomic framework, and reaching understandings on a strong policy package to durably ensure fiscal sustainability.

“Performance under the program has been strong. All but one quantitative performance criteria have been met for end-January 2023 and all structural measures at end-March 2023 have been completed.

“Growth is estimated to have slowed down to 3.5 percent in 2022 and was negatively affected by lower cashew exports. Inflation increased to 7.9 percent in 2022.due in part to the surge in commodity prices associated with the war in Ukraine. The 2022 overall fiscal deficit stood at 5.8 percent of GDP and public debt remained high at about 80 percent of GDP. Going forward, growth is expected to recover to 4.5 percent in 2023. Average inflation should be contained at 5.5 percent.

“Raising domestic revenue, containing current expenditure and limiting budget transfers will be key to ensure fiscal sustainability and allow the program to remain on track going forward. This entails strengthening revenue administration through corrective action plans and the implementation of the new VAT law to be implemented during the second half of 2023. It also implies the adoption of strong expenditure containment measures including a temporary freeze of public hiring and a more efficient wage bill management supported by a new census of public sector employees; a limitation of budget transfers towards the national utility company which urgently needs to address persistent operational losses and represent a significant fiscal risk. These steps will gradually help to create fiscal space for investing in key social sectors (health, education, food security) and infrastructure. The authorities should further strengthen debt management, gradually clear outstanding domestic arrears, and solve all legacy external arrears while preventing new ones.

“Despite the progress achieved, further financial support from the international community, through grants and concessional lending, is crucial. Sustained political stability will be critical to support economic growth and reforms.

“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 during the second half of May.

“The IMF team met with H.E. President Sissoco Embaló, Prime Minister Nabiam, Finance Minister Té, Minister of Economy Varela Casimiro, Minister of Public administration, Labor, Employment and Social Security Djaló, Minister of Fisheries Viegas, Minister of Natural Resources Cabi, BCEAO National Director Cassama, and President of the Court of Auditors Baldé. The team met with officials from the Ministries of Finance, Economy, 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 from private and public sector enterprises, as well as key bilateral and international partners.”