The Executive Board of the International Monetary Fund (IMF) today completed the first and second reviews of Guinea-Bissau’s economic performance under the program supported by an Extended Credit Facility (ECF) arrangement.1 Completion of the reviews enables the disbursement of SDR 5.112 million (about US$6.9 million), bringing total disbursements under the arrangement to SDR 7.952 million (about US$ 10.8 million). The Executive Board also approved the authorities’ request for rephasing of the remaining reviews and associated disbursements under the arrangement.
Guinea-Bissau’s three-year arrangement for SDR 17.04 million (about US$23.1 million or 60 percent of quota at the time of approval of the arrangement) was approved on July 10, 2015 (see Press Release No. 15/331). The ECF-supported program aims to restore macroeconomic stability and efficiency in public service delivery to foster inclusive growth, while protecting poverty-reducing infrastructure and social spending.
Following the Executive Board discussion on Guinea-Bissau, Mr. David Lipton, First Deputy Managing Director and Acting Chair, issued the following statement:
“Performance under the Extended Credit Facility (ECF)-supported program has been broadly satisfactory highlighted by strong economic growth in spite of political uncertainties. However, continuing political tensions pose downside risks to the outlook. The authorities are requesting revisions to the timing of the structural reform agenda and a re-phasing of the remaining reviews and disbursements. They are also requesting modification of PCs for the third and subsequent reviews, in view of changes to the technical memorandum of understanding to clarify the assessment of these criteria.
“The authorities’ resolute stance in unwinding the bank bailouts is welcome. Following through all steps until the bailouts are irreversibly unwound will be important to safeguard public finance. To strengthen the banking sector, it will also be necessary to implement remedial actions as they are being elaborated by the regional banking supervision and to enforce existing prudential norms.
“In light of the tight fiscal situation and still limited external budget support, fiscal discipline and accelerated structural reforms to create fiscal space for priority spending remain the centerpieces of the ECF-supported program. The strengthening of public finance management through an increased role played by the treasury committee and improved tax administration are welcome and necessary to regain confidence of private investors and development partners. To reduce the heavy cost to the budget, plans to make the water and electricity company (EAGB) financially transparent ahead of more far-reaching reforms in the medium term are also welcome.
“Stepped up efforts are needed to reduce corruption, including by strengthening the legal framework to address money laundering and the financing of terrorism. The improvements in the compilation of statistics is welcomed but needs to be sustained through adequate resourcing.”
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.