Press Release No. 23/412

IMF Executive Board Completes the Third Review of the Extended Credit Facility Arrangement for Guinea-Bissau and Approves US$8.2 Million Disbursement

November 29, 2023

• The IMF Executive Board decision allows for an immediate disbursement of about US$8.23 million (SDR6.16 million) to help meet the country’s financing needs.
• The IMF Executive Board also approved an augmentation of access under the Extended Credit Facility arrangement from about US$37.96 (SDR28.4 million) to US$53.14 million (SDR39.76 million or 140 percent of quota).
• The new government is firmly committed to implementing the policies underpinning the IMF-supported program.

Washington, DC – November 29, 2023 : The Executive Board of the International Monetary Fund (IMF) completed today the third 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 completion of the review enables the disbursement of SDR6.16 million (about US$8.23 million) to help meet the country’s balance-of-payments and fiscal financing needs amid the significant deterioration of Guinea-Bissau terms of trade and a tightening of regional financing conditions. With the third review disbursement, the total amount disbursed under the arrangement is SDR13.27 million (about US$ 17.7 million).

Performance under the ECF supported program was weaker than expected for the third review, against a challenging external and domestic context. The authorities remain committed to strong policies and are taking measures to ensure that end-December 2023 targets are met. In completing the review, the Executive Board also approved an augmentation of access under the ECF arrangement from SDR28.4 million (about US$37.96 million) to SDR39.76 million (about US$53.14 million or 140 percent of quota). The Executive Board also granted a waiver for nonobservance of performance criteria on the floor on domestic tax revenue, the ceiling on wages, the floor on the domestic primary fiscal balance, and the nonobservance of the continuous performance criterion on ceiling on new external arrears. Furthermore, the Executive Board approved the request to modify the end-December 2023 performance criterion on the domestic primary balance and completed the financing assurances review.

The economy continues to recover in 2023 and growth is projected at 4.2 percent, the same level as in 2022. Inflation is expected to reach 8 percent in 2023, because of soaring food prices. The overall fiscal deficit is projected at 5.6 percent of GDP in 2023, partly reflecting the spending overruns during the legislative elections period. Public debt is projected to decline and reach 76.5 percent of GDP in 2023 because of a lower fiscal deficit, an appreciation of the domestic currency and higher nominal GDP. 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.

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

“Guinea-Bissau’s successful completion of the last legislative election and the timely formation of the new government is commendable. However, the country is facing acute economic shocks from disappointing cashew exports, soaring food inflation, and a tightening of regional financing conditions. Sustained implementation of the reform agenda under the ECF arrangement will be crucial, and the authorities’ firm commitment to the program objectives is welcome. The augmentation of access under the ECF, together with increased support from development partners, will help cover the balance of payments needs.

“Program performance was weaker than expected, but the authorities have adopted corrective actions and a draft 2024 budget in line with program parameters. They are strictly rationalizing non-priority expenditure, mobilizing additional revenue, and tightly controlling the wage bill. Continued efforts in these areas and sustained fiscal consolidation are needed to ensure debt sustainability. The new government is leading structural reforms to mitigate fiscal risks in the energy and financial sectors, as well as in governance and the rule of law, which are pivotal to the program’s success. Implementation of policies to foster agricultural and economic diversification is also important.

“Progress continues in strengthening external audits, public procurement, and AML/CFT effectiveness. The Audit Court has published the audit report of the High Commissioner for COVID-19. The authorities continue to publish the beneficial ownership information of all public contracts. A series of legislative reforms are underway to modernize the asset declaration regime and improve the anti-corruption and AML/CFT framework