IMF Staff Completes 2017 Article IV and ECF Review Mission to Guinea-Bissau

The government's economic program supported by the IMF is broadly on-track and the mission was able to reach understandings, ad referendum, on policies needed to conclude the fourth ECF review.

The discussions in the context of Article IV consultation focused on key medium-term priorities, including actions to durably reinforce public finances, strengthen the banking sector, and enhance the business environment.

An International Monetary Fund (IMF) team led by Tobias Rasmussen visited Guinea-Bissau from September 20 to October 3, 2017, to conduct discussions for the 2017 Article IV consultation and the fourth review of Guinea Bissau's IMF-supported program under the Extended Credit Facility (ECF).[1] The discussions covered economic and banking sector developments and the policies needed to lay foundations for sustained and broad-based economic growth.

At the end of the visit, Mr. Rasmussen issued the following statement:

The IMF team reached a staff-level agreement with the authorities on the economic policies needed to complete the fourth review of the ECF. The staff-level agreement is subject to approval by the IMF Executive Board, which is slated to consider the staff report for the 2017 Article IV consultation and the fourth ECF review in early December 2017. Upon approval, drawings of about US$4.3 million would become available to Guinea-Bissau.

Program implementation for the fourth review has been good. The mission welcomed the authorities' strong commitment to the program's targets and its objectives of entrenching macroeconomic stability and advancing structural reforms to support strong and broad-based economic growth. All performance criteria and indicative targets for end-June 2017 were met, and there has been solid progress on structural reforms.

Economic activity is buoyant. Real GDP growth for 2017 is now projected at 5.5 percent, with inflation around 2 percent and a broadly balanced external current account. The good results have been supported by record high prices of cashew, which have significantly increased incomes for rural households.

Prudent and effective fiscal management has improved the fiscal position and bolstered macroeconomic stability. Ongoing efforts to strengthen revenue mobilization, supported by technical assistance from the IMF and other partners, has supported a general upwards trend in collections. Expenditure controls have been strengthened by more rigorous application of budgetary procedures. Debt management has also improved, including by consolidating outstanding loans from commercial banks and cancelling credit lines.

The mission welcomes the authorities' actions to shore up the banking sector and ensure compliance with prudential norms, including the recently increased capital requirement. It encourages the government to take steps to deepen financial markets and elaborate a national plan for financial inclusion.

Looking ahead it will be important that the fiscal space now being opened is used effectively towards social and infrastructure priorities. Advances in public financial management will need to be broadened to include a structural overhaul of the wider public sector. This includes reforming the utility company, EAGB, to improve provision of water and electricity.

It will also be important to make inroads on diversifying the economy and reducing its reliance on cashew exports. This will require promoting an attractive business environment with stable and transparent regulation in support of healthy competition.

The team met with President Joseacute; Maacute;rio Vaz, Prime Minister Umaro Sissoco Embaloacute;, Attorney General Antoacute;nio Sedja Mam, President of the Court of Auditors Dionisio Cabi, Chairman of the Joint Chiefs of Staff Biaguecirc; Na N'Tam, Minister of Finance Joatilde;o Fadia, Central Bank of West African States (BCEAO) National Director Helena Nosolini Embaloacute;, other high level officials, as well as representatives of civil society, the private sector, and the donor community.

The IMF mission wishes to express its gratitude to the authorities for the constructive discussions and for their warm hospitality.rdquo;

[1] The ECF is a lending arrangement that provides sustained program engagement over the medium to long-term in case of protracted balance of payments problems. The arrangement for Guinea-Bissau, in an amount equivalent to SDR 17.04 million (about US$23.5 million, or 60 percent of quota) was approved on July 10, 2015 (see Press Release No.15/331).

Source: International Monetary Fund (IMF).

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