Guinea-Bissau
Third Review Under the Three-Year Arrangement Under the Extended Credit Facility and Financing Assurances Review: Staff Report; Joint IMF/World Bank Debt Sustainability Analysis; Informational Annex; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Guinea-Bissau
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International Monetary Fund
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Publication Date:
14 Dec 2011
eISBN:
9781463928513
Language:
English
Keywords:
ISCR; CR; West AFRITAC; revenue; debt; deficit; revenue collection; Nontax revenue; excl. fishing comp; budget support; IMF staff estimate; Arrears; Current spending; Capital spending; West Africa
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A confluence of developments is creating a more favorable economic situation for Guinea-Bissau. The country has moved away from debt distress with the debt relief granted after the Highly Indebted Poor Countries completion point last year. Fiscal sustainability has improved considerably through expenditure control and substantial increases in revenue. For the first time, the 2012 budget envisages sufficient fiscal revenue to cover current spending. The immediate challenge is to maintain fiscal prudence, modernize the public administration and defense and security sectors, and create space for private sector development.

Abstract

A confluence of developments is creating a more favorable economic situation for Guinea-Bissau. The country has moved away from debt distress with the debt relief granted after the Highly Indebted Poor Countries completion point last year. Fiscal sustainability has improved considerably through expenditure control and substantial increases in revenue. For the first time, the 2012 budget envisages sufficient fiscal revenue to cover current spending. The immediate challenge is to maintain fiscal prudence, modernize the public administration and defense and security sectors, and create space for private sector development.

I. Overview

1. A confluence of developments is creating a more favorable economic situation for Guinea-Bissau:

  • High prices for the predominant export (cashews) and robust cashew harvests.

  • Continued political stability since the presidential election in 2009, a representative civilian government, and an unchanged economic team for three years.

  • Improved institutions and technical capacity, with extensive technical assistance from development partners.

2. Effective implementation of the ECF-supported program is beginning to yield measurable results:

  • The country has moved away from debt distress with the debt relief granted after the HIPC completion point last year.

  • Fiscal sustainability has improved considerably through expenditure control and substantial increases in revenue. For the first time, the 2012 budget envisages sufficient fiscal revenue to cover current spending. This will allow all budgetary assistance to be directed to support investment projects.

  • While the wage bill swallowed all tax revenues in 2008, it now accounts for less than two thirds. Better expenditure control has created space for spending in priority areas identified by the government (infrastructure, agriculture, health, education).

3. It will be important to stay the course for sustainable growth and poverty alleviation.

  • With mounting domestic pressure for faster delivery of tangible economic results along with a subdued outlook for the external environment, the authorities’ determination to keep on track and deepen reforms will be paramount. Political stability and improved security continue to be critical to economic prospects.

  • The immediate challenge is to maintain fiscal prudence, modernize the public administration and the defense and security sectors, and create space for the private sector development.

  • The medium-term challenge is to create a competitive economy and to reduce vulnerability and dependency on one export by improving the business environment and diversifying the economy.

II. Recent Developments and Performance Under the ECF

4. The economy benefitted from high prices for cashew exports and a good cashew harvest (Figures 1–2 and Tables 1–2). Prices reached about a third higher than envisaged at the previous review, and due to favorable weather, the cashew harvest was about 30 percent higher. This helped contain balance of payments pressures arising from higher food and fuel import bills. Headline inflation rose to 5.5 percent (year-on-year) in September 2011, but core inflation, which excludes food and energy, has remained subdued. The increase in income from rising cashew exports helped improve the external current account (Table 3).

Figure 1.
Figure 1.
Figure 1.

Guinea-Bissau: Macroeconomic Developments, 2006–11

Citation: IMF Staff Country Reports 2011, 355; 10.5089/9781463928513.002.A001

Sources: Guinea-Bissauan authorities and IMF estimates.Source: African Department database, BCEAO, Guinea-Bissauan authorities and IMF staff estimates.
Figure 2.
Figure 2.

Guinea-Bissau: Medium-Term Outlook, 2009–14

Citation: IMF Staff Country Reports 2011, 355; 10.5089/9781463928513.002.A001

Sources: Guinea-Bissau authorities and IMF staff estimates and projections.
Table 1.

Guinea-Bissau: Selected Economic and Financial Indicators, 2008–14

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Sources: Guinea-Bissau authorities; and IMF staff estimates and projections.

As of May 2011 (IMF Country Report No. 11/67)

The figure for 2012 reflects the impact of administrative measures to mobilize more revenues.

Contribution to the growth of broad money in percent.

As of end–2010, includes 8.3 percent of GDP in domestic arrears, consisting of pre-1999 arrears (3.3 percent of GDP) and preliminary estimates of the 2000–07 arrears registered at the treasury (5 percent of GDP). It does not include the preliminary estimates of 2000–07 arrears (13.4 percent of GDP) not registered at the treasury.

Table 2.

Guinea-Bissau: Monetary Survey, 2008–14

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Sources: BCEAO; and IMF staff estimates and projections.

As of May 2011 (IMF Country Report No. 11/67).

Ratios calculated on the basis of average annual stocks.

Table 3.

Guinea-Bissau: Balance of Payments, 2008–14

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Sources: BCEAO; and IMF staff estimates and projections.

As of May 2011 (IMF Country Report No. 11/67).

Includes food aid and technical assistance to projects.

Excludes the financing gap, which BCEAO includes in the capital account.

Assumed to be filled with IMF resources and additional donor support.

Until 2011, BCEAO average prices. The prices for 2011 and onward are based on the WEO projections for ground nuts’ prices

At program exchange rates.

5. The FY 2011 budget execution has been broadly consistent with program targets (Text Table 1). Through September, tax revenue was in line with the program while nontax revenue fell short of the programmed level due to lower-than-envisaged fishing compensation from the EU. Primary expenditure (excluding the counterpart to fishing compensation) were also broadly in line with the program, with slightly higher current spending (underbudgeted representation and other expenses) offset by lower domestically financed capital spending (delays in implementing the public investment program). As a result, the domestic primary deficit target was met as envisaged under the program.

Text Table 1.

Guinea-Bissau: Fiscal Outturn, January-September

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Sources: GNB authorities and IMF staff estimates and projections.

Projected at the Second ECF Review in May 2011.

6. Program performance has been satisfactory. All performance criteria through end-June were observed (Table 4). All but one structural benchmark for the third review were met. The unified payroll system has been extended to most ministries and work is underway to have it completed in the ministries of defense and interior (Table 5). Also, all but one of the indicative targets were met through end-September. The target on non-regularized expenditures (DNTs) was missed due to insufficient control in the face of spending pressures. The authorities managed to bring DNTs below target by end-October and agreed to strictly enforce the existing regulation which restricts such spending only to exceptional circumstances.

Table 4.

Guinea-Bissau: Quantitative Indicators for the ECF Program for 2011 Quarterly Targets 1

(Cumulative, CFAF millions)

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Cumulative from January 1. The definition of the aggregates and adjustors is provided in the Technical Memorandum of Understanding (TMU).

Performance criteria (PC) are defined for June and December. March and September are indicative. All PC are ceillings and PC 3, 4, and 5 apply

At the time of the second ECF review (IMF Country Report No. 11/67), the indicative targets 6, 7, and 9 were revised compared to program (IMF Country Report No. 10/379) to reflect the higher revenue base from 2010 and the additional budget support.

Table 5.

Guinea-Bissau: Structural Benchmarks under the ECF

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Ministry of Finance

Ministry of Labor and Public Administration

Ministry of Economy

III. The Economic Outlook And Risks

7. The near-term outlook remains favorable.

  • Real GDP growth is expected to accelerate to 5.3 percent in 2011, backed by a good harvest of cashews and favorable terms of trade. Economic prospects for 2012 remain favorable, owing to restoration of the public investment program and buoyant construction activity. The gradual return of confidence after the HIPC completion point heralds an improved economic outlook.

  • Annual average inflation is projected to reach 4.8 percent in 2011. Core inflation, however, will remain subdued. Headline inflation should taper off to below the WAEMU’s target range of 2(±1) percent in 2012 because international food and fuel prices are expected to weaken.

  • The large improvement in the terms of trade is expected to reduce the current account deficit in 2011, but only moderately, due to the offset of higher imports, especially food and fuel. Assuming cashew export prices revert to their medium-term average, the current account would widen modestly in 2012.

8. Risks to the outlook persist. From the external environment, risks arise from lower-than-expected cashew prices or growth in advanced economies. Domestically, pressures for pre-election shifts in economic policies could pose risks as well.

IV. Policy Discussion

9. The discussions focused on the need to stay the course, consolidating gains on an improved fiscal situation and deepening the post-HIPC reforms. Reform areas continue to be mobilizing more revenue, modernizing the public administration, and accelerating growth under the new Poverty Reduction Strategy Paper (PRSP).

A. Maintaining Fiscal Prudence

10. The fiscal program for 2011 continues to be fully financed1 (Text Table 2 and Tables 6a–6b). For the year as a whole, tax revenue is projected to reach the program objective, consolidating a gain of almost 3 percentage points of GDP in the last three years. Nontax revenue will reflect lower-than-expected fishing compensation from the EU and fishing licenses. Also, budget support is expected to be slightly below program owing to lower-than-envisaged assistance from the World Bank and the AfDB. On the spending side, higher current spending (mostly underbudgeted representation expenses) would be more than offset by lower-than-programmed capital expenditure, reflecting delays in the foreign financing and execution of capital projects, even though domestically financed capital expenditure increased compared to last year. As a result, the overall balance and financing remains as projected in the program without recourse to domestic financing.

Text Table 2.

Guinea-Bissau: Fiscal Projection, 2010–11

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Sources: GNB authorities and IMF staff estimates and projections.

Projected at the Second ECF Review in May 2011.

Table 6.

Guinea-Bissau: Central Government Operations, 2008–14

(CFAF billions)

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Sources: Guinea-Bissau authorities; and IMF staff estimates and projections.

IMF Country Report No. 11/119.

Excludes the cashew export surcharge introduced in April 2011

The figure for 2012 reflects the impact of administrative measures to mobilize more revenues.

Beginning in 2013, assumes payment of scheduled domestic debt owed to the BCEAO and rescheduling of scheduled interest and amortization falling due in 2010 and principal falling due in 2011 and 2012 with terms similar to previous reschedullings.

For 2010 arrears are treated as debt relief at HIPC completion point.

Assumed covered with IMF resources under the ECF arrangement until 2012.

11. The discussions of the 2012 budget focused on the need for the authorities to keep fiscal prudence. The budget reflects a tight envelope for resources and growing pressure for higher spending. After years of spending containment, pressure is intensifying from various interest groups for greater outlays and higher wages. An additional challenge is relatively low budget support, which is expected only from the World Bank (CFAF 3.3 billion) and the AfDB (CFAF 3 billion) in 2012. The authorities continue to assume no budget support from the EU in 2012.2

12. The authorities designed the 2012 budget to reach several important objectives: keep spending within available resources without adding to the debt burden; mobilize more revenues largely by reducing implicit customs subsidies and exemptions and tightening controls; continue to reduce the large stock of domestic arrears of previous years consistent with the government medium-term strategy; protect priority spending; and incorporate resources for contingencies. For the first time in recent years, fiscal revenues in the budget will be sufficient to cover current expenditures. Thus, beginning in 2012, all budgetary assistance will be available to be used to support spending on infrastructure and other investment projects consistent with the goal of raising investment and growth. Some of the key parameters for the budget that will be submitted to the national assembly are fiscal revenues of 12.7 percent of GDP, a domestic primary deficit of 1.6 percent of GDP (Text Table 3), and a general budget reserve allocation of CFAF 1 billion (higher than in previous years). To meet budget objectives, the government reiterated its commitment to reduce spending or recover more revenues, as needed, to make up for financing shortfalls.

Text Table 3.

Guinea-Bissau: Fiscal Projection, 2011-12

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Sources: Guinea-Bissau authorities and IMF staff projections.

MEFP ¶9-10

13. The authorities and staff agreed on the need to sustain efforts to further improve fiscal revenue. The 2012 budget is anchored on revenue raising measures and fiscal revenues are expected to increase by about 2 percentage points of GDP (Text Table 4). Revenue raising measures are expected to contribute 0.6 percentage points of GDP to the revenue target. The government has already taken measures to reinforce fiscal revenues: in June, the reference price for imported diesel was adjusted by 24 percent. In addition, the government has been adjusting domestic fuel prices monthly to allow for a full pass-through of international prices into domestic prices (Figure 3). As part of the 2012 budget, the government plans to raise the reference price of certain imports (rice, flour, sugar, diesel) to market levels, and eliminate exemptions of capital good imports, including fuel, by the government and NGOs. The increase in revenue also reflects higher fishing compensation from the EU due to rephasing of committed funds for 2011. At the same time, the government will continue to strengthen tax and customs administration.

Text Table 4.

Impact of revenue raising measures in 2012

(Percent of GDP)

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Source: Guinea-Bissau authorities and IMF Staff estimates.
Figure 3.
Figure 3.

Guinea-Bissau: Consumer Price Inflation and Import Prices

Citation: IMF Staff Country Reports 2011, 355; 10.5089/9781463928513.002.A001

B. Structural Reforms and the Poverty Reduction Strategy

Deepening fiscal reform

MEFP ¶13 (i)

14. The authorities plan to deepen fiscal reforms. Staff underscored that despite recent progress, Guinea-Bissau’s fiscal revenue-to-GDP ratio is still low compared with regional peers, and that sustained improvements in tax collection would be necessary to meet the fiscal targets. Staff and the authorities agreed on the importance of further revenue administration reforms. Priorities are to improve capacity and efficiency in customs and revenue administration and further to broaden the tax base. The authorities are advancing in strengthening a legal framework to regulate revenue-sharing agreements among line ministries and completing the audit of large importers’ tax liabilities which determines the gap between declared revenue and what should have been paid (all benchmarks for the fourth review). The agenda of fiscal reforms for 2012 was developed in close collaboration with a technical assistance mission from FAD, and includes: (i) revamping nontax revenue collection; (ii) reducing the volume of tax-exempted fuel; (iii) tackling tax evasion by enhancing controls on taxpayers that stopped filing; (iv) raising self-assessed filing rates; and (v) extending the ASYCUDA++ to key border posts outside Bissau (all new benchmarks). The authorities are preparing for a transition from the general sales tax to a VAT in line with other WAEMU countries to broaden the tax base in the medium term. In line with the advice from a recent FAD technical assistance mission, staff underscored that the introduction of the VAT, while a sound reform, will require careful preparation in the coming couple of years, and would benefit from technical assistance from development partners.

Improving the business climate

MEFP ¶13 (iii)

15. The authorities wish to create an environment that could attract private investment and promote economic diversification. The government is moving ahead with assistance from donors to address key supply-side constraints and reduce the cost of doing business. The public investment program aims to relieve infrastructure bottlenecks, tackling infrastructure gaps and unreliable electricity supplies that limit private sector expansion and drive up costs. The action plan to remove impediments to private sector development will be submitted to the Council of Ministers for approval in 2012 (new benchmark). A plan to manage the country’s natural resources is work in progress (benchmark for the fourth review).

MEFP ¶12

16. Both the authorities and the private sector are exploring ways to promote the industrialization of agricultural products (Box 1). A new fund, created in partnership with the private sector, is being financed through a new cashew export surcharge (about CFAF 8 billion in 2011, 1.7 percent of GDP). The new fund will finance and guarantee industrialization of agricultural products, a government priority.3 The government and the private sector (the Chamber of Commerce) agreed that resources would be directly channeled to the fund and would not be included as revenue in the government budget in light of challenges of earmarking revenue. The authorities agreed with staff that they will need to closely monitor operations of the new fund and revisit their policy, including the treatment of resources, in light of experience in the first year. Staff advised that the authorities should set up clear and transparent statutes following best practices, with assistance from the World Bank, and they should secure proper oversight of the fund’s operations. The government and the Chamber of Commerce agreed that management and operations of the fund should be transparent and the interests of all stakeholders in the cashew-export chain should be taken into account.

Cashew Export Surcharge

In April 2011 the Ministry of Commerce, in collaboration with the Chamber of Commerce, introduced a new surcharge on cashew exports, and in May 2011 the Council of Ministers issued a decree for a new Fund to promote the industrialization of agricultural products (FUNPI). The funds collected through the surcharge will be managed by a public-private partnership for which the statutes are being drafted. The surcharge is additional to the existing export tax already collected by the Ministry of Finance.

The impact of the cashew surcharge will depend on several considerations. By lowering domestic input prices, export taxes can work as an indirect subsidy to processing industries. They can also lower return on primary commodities and by providing additional tax-generated resources to the processing sector such taxes can increase the relative attractiveness of the sector. In Mozambique, for instance, an IEO report1 concluded that a phasing-out of the cashew export tax in the 1990s hurt the cashew processing sector. However, the surcharge is likely to reduce cashew producers’ income. Given Guinea-Bissau’s small share of world cashew production (about 4 percent), the additional cost of the surcharge is expected to be borne by domestic producers through a lower farm gate price. In addition, gains resulting from income redistribution from unskilled workers to a few processors and their more skilled employees could be lower than expected due to domestic market imperfections (i.e., layers to traders) and competition in the international processing industry dominated by India and Viet Nam. Moreover, lower cashew prices may discourage investing in cashew production, which would undermine the future growth potential of the whole industry.

Much will depend on how the FUNPI is implemented to transform the agro-industrial sector, and pressing challenges are: setting up clear and transparent statutes to make best use of resources; and ensuring that the fund is managed professionally so government and private sector objectives are met.

1 Independent Evaluation Office, IMF (2009), “IMF Involvement in Trade Policy Issues in Low-Income Countries: Seven Case Studies.”

Modernizing public administration

MEFP ¶13 (ii)

17. The authorities are following-up on the action plan to modernize the public administration approved early this year. The authorities have made further progress in extending the computerized and unified payroll system, and plan to extend it to the ministries of interior and defense by end-March 2012 (rephased benchmark). The personnel management system (SIGRHAP) began operating in November. To maintain momentum on public administration reform, the authorities intend to enforce mandatory retirement and issue management regulations for public employees in 2012 (new benchmark).

MEFP ¶13 (iv)

18. With the assistance of international partners, the authorities are intensifying efforts to create an enabling environment for security sector reform (Box 2). The ECOWAS, UN, and bilateral partners are involved in supporting peace building and political stability. Reform initiatives are being processed at different paces. Most advanced are the setting up of the legal framework restructuring the defense and security sectors, reflected in the approval of several decrees and laws by the National People’s Assembly (ANP) by the end of 2010 as well as the professionalization of the forces through training activities deployed by the Angola and Brazilian missions. The ECOWAS is expected to lead the effort on financing the reform, including the pension fund, a pre-requisite for the reform to take place. The government is committed to retiring a first group of the police and the armed forces, once support from development partners becomes available.

Update on Security Sector Reform (SSR)

The SSR is underway following agreements between Guinea-Bissau and its partners. Current military personnel number about 4,500 with an inverted pyramid organizational structure, consisting of about 3,100 officers and about 1,400 soldiers. The government wants to streamline the military to a force of about 3,500 through a combination of retirement schemes and demobilization and to remake the structure to no more than 30 percent permanent officers with the rest drafted military personnel. The roadmap for the reform, designed with the assistance of the UN, ECOWAS, and the Community of Portuguese-Speaking Countries (CPLP) lays out a plan to gradually retire up to 2,500 military personnel between 2012 and 2015 by providing an attractive pension scheme.

ECOWAS expressed its intention to help finance the SSR reform with US$65 million, of which US$45 million would be dedicated to the pension fund. A memorandum of understanding between ECOWAS-the CPLP, and the Government of Guinea-Bissau for the implementation of the roadmap and the transfer of funds is currently under negotiation.

Reducing poverty

19. The government adopted its second five-year PRS in July, prioritizing its development policies. The PRSP has four pillars: (i) strengthening the rule of law and improving the efficacy of public administration; (ii) guaranteeing macroeconomic stability, consolidating public financial management reforms and fostering robust private sector development; (iii) promoting sustainable, broad-based economic growth; and (iv) enhancing human development. The success of the new PRSP will hinge on prioritizing action plans. Recent improvements in public financial management should help the authorities improve their allocation of resources and enhance the efficiency of expenditure execution.

C. Debt Policies and Financing Assurances

MEFP ¶15

20. The Paris Club agreed in May to provide extensive debt relief to Guinea-Bissau, further reducing debt vulnerabilities. The authorities are working on bilateral agreements with Paris Club creditors, intending to finalize them by the end of 2011. The authorities are making best efforts to finalize agreements with the remaining non-Paris club creditors, seeking comparable treatment from remaining creditors; and they are continuing good faith efforts to negotiate with an external private creditor.

21. An update of the external debt sustainability analysis (DSA) suggests a moderate risk of debt distress. The net present value of the external debt would remain low and sustainable throughout the projection period. The minimum concessionality requirement for foreign currency borrowing has been lowered to 35 percent from 50 percent, in line with Guinea-Bissau’s moderate risk of debt distress. Staff urged the authorities to maintain low debt vulnerability with new external borrowing only on concessional terms to address pressing development needs while avoiding the re-accumulation of unsustainable debt.

MEFP ¶13 (v)

22. The authorities agreed that strengthening debt management capacity remains a priority. The adoption of the debt management system, SYGADE, remains on track to record, monitor, and manage all public debt, with assistance from the United Nations Conference on Trade and Development (benchmark for the fourth review). The SYGADE would be further extended between the Central Bank of West African States (BCEAO) and the Ministry of Finance in 2012, which would help improve management capacity to monitor domestic debt (new benchmark).

MEFP ¶16-17

23. The authorities reiterated their commitment to implementing their domestic arrears clearance strategy, by making annual payments within available resources. For debts owed to the BCEAO, the authorities requested a deferral of payment and better terms and are engaging in negotiations with the BCEAO.

V. Program Monitoring and Risks

24. Program performance will be monitored on a semi-annual basis through structural benchmarks and quantitative targets. Given no significant changes to the macroeconomic outlook, all performance criteria and other quantitative targets for end-December 2011 remain unchanged. The program sets new performance criteria for June and December and quantitative indicative targets for March and September 2012 (Tables 7–8). The fourth and fifth reviews are scheduled for May and December 2012, respectively.

Table 7.

Guinea-Bissau: Quantitative Indicators for the ECF Program for 2011–2012 Quarterly Targets1

(Cumulative, CFAF millions)

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Cumulative from January 1. The definition of the aggregates and adjustors is provided in the Technical Memorandum of Understanding (TMU).

Performance criteria (PC) are defined for June and December. March and September are indicative. All PC are ceillings and PC 3, 4, and 5 apply continously.

Table 8.

Guinea-Bissau: Structural Benchmarks for 2012

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25. Risks to the IMF’s resources are moderate. The country’s capacity to repay the IMF is reasonably sound (Table 9). Risks to IMF resources are mitigated to a significant degree by the BCEAO’s role as fiscal agent and its solid track record in making payments to the IMF.

Table 9.

Guinea-Bissau: Indicators of Capacity to Repay the Fund, 2008–18

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Sources: IMF staff estimates and projections.

Data are actual through end-September 2011 and are projected after that.

Effective on January 7, 2010 interest on ECF credit outstanding would be zero in 2010 and 2011. It is assumed the ECF interest rate would be at 0.25 percent from 2012 and onward. Charges include net SDR charges and SDR assessments.

A new ECF arrangement of 157.5 percent of quota (SDR 22.365 million) was approved in May 2010, of which 37.5 percent of quota (SDR 5.325 million) was used for early repurchase of outstanding EPCA credit.

Total debt service includes IMF repurchases and repayments.

Guinea-Bissau reached the HIPC completion point in December 2010 and received the remaining HIPC assistance on the stock basis.

VI. Staff Appraisal

26. Economic performance has been favorable in 2011, but the economy remains vulnerable. Economic growth accelerated this year, supported by a good cashew harvest and much better terms of trade. But risks arise from fragile political stability and vulnerability to external shocks, especially given heavy dependence on one export.

27. The authorities should be commended for satisfactory performance under the program and for maintaining fiscal discipline. Strict control over current spending will be critical to meeting the fiscal targets for 2011. The tax buoyancy observed in the first nine months of the year is a result of healthy economic activity and improved administration, and should be maintained.

28. The 2012 budget strikes the right balance between fiscal prudence and large development needs. The budget is appropriately designed because it keeps spending within available resources; mobilizes more revenue; continues to reduce domestic arrears of previous years; protects priority spending; and preserves resources for contingencies and reforms. The government ability to mobilize sufficient own revenues to cover its current expenditure will make it possible to direct all budgetary assistance for infrastructure and other investment projects.

29. Staff urges the authorities to stay the course and sustain progress in implementing structural reforms. The focus on mobilizing more revenue, improving public financial management, and strengthening debt management is appropriate and should allow the government to consolidate gains achieved so far in these areas. Staff supports the authorities’ intent to undertake further revenue-raising reforms, particularly through eliminating implicit subsidies, modernizing tax administration, tightening controls in customs, and improving control of large taxpayers. Progress in public administration reform is encouraging, but more needs to be done, and it is crucial to complete the unification of the payroll system. Acceleration of reforms that remove impediments to private sector development and strengthen human capital development is also needed to boost growth and reduce poverty. The authorities’ policy to seek industrialization of agricultural products via a new fund created in partnership with the private sector should be revisited, including the treatment of resources, in light of experience in the first year of operations of the new fund.

30. Staff recommends the completion of the third review under the ECF arrangement and the financing assurances review, and supports the authorities’ request for the fourth disbursement under the three-year ECF arrangement. The authorities’ satisfactory performance, the significant progress achieved to date, and the demonstrated commitment to achieving the key objectives of the program warrant support from the IMF.

Table 10.

Guinea-Bissau: External Financing Requirements and Sources, 2008–12

(CFAF billions)

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Sources: BCEAO; and IMF staff estimates and projections.
Table 11.

Guinea-Bissau: Reviews and Disbursements under the Three-Year ECF Arrangement, 2010–13

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Source: IMF estimates.

For the amount approved for disbursement at the time of Board approval of the arrangement, 37.5 percent of quota (SDR 5.325 million), was approved to immediately repurchase previously provided EPCA credit.

Appendix I. Supplementary Letter of Intent

Bissau, November 14, 2011

Ms. Christine Lagarde

Managing Director

International Monetary Fund

Washington, D.C. 20431

U.S.A.

Dear Ms. Christine Lagarde,

1. This letter of intent and the attached memorandum of economic and financial policies (MEFP) update and supplement our correspondence of April 29, 2011, and describe performance under the government’s economic program since then.

2. The government’s economic program, supported by a three-year Extended Credit Facility (ECF), is on track. All performance criteria through end-June 2011 have been observed, and all structural benchmarks for the third review were met, except for the unified payroll system which we have extended to most ministries and plan to complete extending it to the ministries of defense and interior by end year. All but one quantitative indicative targets for end-September 2011 were also met (see Tables 1 and 2 of the MEFP). Nonobservance of the indicative target on non-regularized expenditures has been brought below target by end-October.

3. The attached Supplementary MEFP summarizes the substantial progress made in implementing the ECF supported program through June 2011 and outlines our economic and structural policies for 2012. The policies elaborated in the MEFP are adequate to achieve the targets and objectives under the program (performance criteria and structural benchmarks for the 2012 are included in Tables 3, 4, and 5 of the MEFP). However, if necessary, the government will adopt additional measures to achieve these objectives. It will consult with the Fund before adopting such measures or if there are changes in the policies contained in the MEFP, in accordance with the Fund’s policies on such consultations.

4. In view of the performance under the ECF-supported program and the government commitment to economic reforms as specified in the MEFP attached, the Government of Guinea-Bissau requests completion of the third review and the fourth disbursement under the ECF arrangement of SDR 2.414 million.

5. In line with our commitment to transparency, we request the IMF to publish this letter of intent, the attached MEFP, the Technical Memorandum of Understanding, and the staff report relating to this request.

Sincerely yours,

/s/

José Mario Vaz

Minister of Finance

Attachment I. Supplementary Memorandum of Economic and Financial Policies for 2011–12

I. Introduction

1. This memorandum updates the MEFP of April 29, 2011, summarizes the progress achieved since then, and defines economic policies for 2012. The program objectives are unchanged: achieving fiscal and external sustainability, reviving economic growth, and making progress toward poverty alleviation. The overarching goal is to improve living conditions for the Guinea-Bissau people, which is essential to maintaining peace and social cohesion.

II. Recent Developments and Performance Under the Program
A. Macroeconomic Developments

2. The economy has benefitted from better-than-expected prices for cashews (the predominant export) and a robust cashew harvest. The increase in terms of trade by about 50 percent has helped sustain incomes and alleviated fiscal and balance of payment pressures. On the inflation front, rising prices of imports of food and fuel pushed average headline inflation up to 5.5 percent through September this year, but core inflation has remained subdued.

3. Budget execution through September is on track. Tax revenue reached slightly above the program objective, but nontax revenue was below program due to lower-than-programmed fishing compensation from the EU. As a result, the fiscal revenue was broadly in line with the program. At the same time, higher-than-programmed current spending was offset by lower-than-envisaged domestically financed capital spending due to a delay in the implementation of public investment program. As a result, the domestic primary deficit remained as envisaged in the program.

B. Performance under the ECF Program

4. Performance under the ECF-supported program has been satisfactory. All performance criteria for end-June 2011 have been observed. All quantitative targets for end-June 2011 were met, except for the nonregularized expenditures (DNTs) which the government brought in the indicative target by end-October (Table 1).

Table 1.

Guinea-Bissau: Quantitative Indicators for the ECF Program for 2011 Quarterly Targets1

(Cumulative, CFAF millions)

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Cumulative from January 1. The definition of the aggregates and adjustors is provided in the Technical Memorandum of Understanding (TMU).

Performance criteria (PC) are defined for June and December. March and September are indicative. All PC are ceillings and PC 3, 4, and 5 apply

At the time of the second ECF review (IMF Country Report No. 11/67), the indicative targets 6, 7, and 9 were revised compared to program (IMF Country Report No. 10/379) to reflect the higher revenue base from 2010 and the additional budget support.

5. All structural benchmarks for the third review were met, except for the unified payroll system. The payroll system has been extended to most ministries. We plan to complete extending the system to the ministries of defense and interior by end-March 2012 (Table 2). The ASYCUDA++ system was satisfactorily implemented, data of largest importers was cross-checked to strengthen revenue collection, and an action plan to remove impediments to private sector development was prepared. A review of all customs exemptions and the publication of the public debt report have been completed with minor delays. A report on the review of all customs exemptions would be submitted to Council of the Ministers by end-October 2011.

Table 2.

Guinea-Bissau: Structural Benchmarks Under the ECF

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Ministry of Finance

Ministry of Labor and Public Administration

Ministry of Economy

III. Macroeconomic Outlook and Economic Policies
A. Macroeconomic Outlook

6. The economic outlook is generally positive. Owing to the good cashew harvest and the large positive terms-of-trade shock, real GDP growth is expected to accelerate to 5.3 percent in 2011. Growth is projected to remain robust in 2012, reflecting expectations of a sustained cashew production, restoration of the public investment program, and buoyant construction activity including on the back of a return of confidence following the HIPC completion point. As imported food and fuel price inflation is projected to be moderate in the second half of this year, headline inflation is likely to decline to 4.8 percent in 2011. Core inflation is expected to remain subdued and headline inflation should come back within the WAEMU’s target range of 2(±1) percent in 2012, as international food and fuel prices stabilize. The external current account is expected to improve only slightly in 2011, driven by higher cashew exports largely offset by higher food and fuel imports. Assuming cashew export prices revert to their medium-term average, the current account is estimated to widen slightly in 2012.

B. Fiscal Policy

7. The government is on track to meet the fiscal program for 2011. Tax revenue would reach the program objective. Nonetheless, fiscal revenue is expected to be below program by 0.3 percentage point of GDP, due to lower fishing compensation from the EU and fishing license receipts. Also budget support is expected to be 0.2 percentage point lower than programmed, reflecting slightly lower-than-programmed assistance from the World Bank and the AfDB. Current expenditure would be 0.5 percentage point higher than programmed, while capital expenditure is projected to be 1.1 percentage points below program, reflecting the continuing delays in the budget execution of capital projects. This would reduce the expenditure envelope by 0.5 percentage point. The lower-than-programmed expenditure would fully cover the projected shortfall in revenue and grants without recourse to domestic financing.

8. The budget for 2012 will be submitted to Parliament in December and it is designed to reach several important objectives: keep spending within available resources without adding to the debt burden; mobilize more revenues largely by reducing implicit customs subsidies (higher reference prices) and exemptions and tightening controls; continue to reduce the large stock of domestic arrears in previous years consistent with the government medium-term plan; protect priority spending; and preserve resources for contingencies and reforms. For the first time in recent years, fiscal revenues in the budget will be sufficient to cover current expenditures. Thus, beginning in 2012, all budgetary assistance will be available to be used to support spending on infrastructure and other investment projects consistent with the goal of raising investment and growth.

9. The revenue objective of the 2012 budget is realistic, and anchored on revenue raising measures. Fiscal revenues are expected to increase by about 2 percentage points of GDP. About half of this increase reflects higher fishing compensation from the EU (0.8 percentage points of GDP) and higher gross revenues due to the recording of exemptions of capital good imports, including fuel, by the government and NGOs (0.4 percentage points of GDP). Revenue raising measures are expected to contribute 0.6 percentage points of GDP to the revenue target next year, in addition to tax and custom administration reforms discussed further below.

10. To support our revenue objective in the 2012 budget, we will put in place the following measures:

  • Raise customs reference prices for diesel, rice, sugar and flour to market levels by the end of 2011. As of end-August 2011, the reference prices and the market prices for these products are as follows.

    • i. Diesel: from CFAF 391 per liter vis-à-vis to CFAF 475.

    • ii. Rice: from CFAF 8,000 per bag of 50kg vis-à-vis CFAF 11,000.

    • iii. Sugar: from CFAF 16,000 per bag of 50 kg vis-à-vis CFAF 16,500.

    • iv. Flour: from CFAF 9,500 per bag of 50 kg vis-à-vis CFAF 10,000.

  • Ensure that no customs exemptions will be granted for the importation of any one of these products.

  • Maintain reference prices close to market levels during the year, with quarterly reviews of price developments.

  • Raise the reference price for cashew exports, to be set at US$ 850 per metric ton.

11. The 2012 budget will be fully financed with no recourse to domestic borrowing. Budget support from donors is expected from the AfDB (CFAF 3 billion) and the World Bank (CFAF 3.2 billion). The budget envelope (revenues and budget support) will be sufficient to sustain the same level of current expenditures as a ratio to GDP estimated for this year, and will support an increase in the domestic financed capital expenditure close to 1 percentage point of GDP. Also, we will make a deliberate effort to contain nonwage current spending to help preserve social and other priority spending.

12. In partnership with the private sector, the government established a fund to promote the industrialization of agricultural products, financed with a surcharge on cashew exports. The management of the fund and the use of its resources (about CFAF7.2 billion by end-August) will be defined with the assistance from the World Bank. The government acknowledges the surcharge transfers resources from the private sector and it will be important to set up clear and transparent statutes to make best use of these funds and manage them professionally to prevent the misuse of resources. The government will submit statues of the fund to the Parliament for its appreciation. We will create an oversight commission with participation of members of the Parliament to monitor the fund operation.

C. Structural Reforms

13. The economic reforms under the ECF supported program are aligned with the objectives under our new 2011–15 poverty reduction strategy approved in July. With the overriding objective to boost growth and reduce poverty, the focus of the program will continue to be mobilizing more revenue, strengthening public financial management, including tax administration and debt management, improving the business climate and removing impediments to private sector development, and modernizing the public administration and improving public services (Tables 5 and 6). We will renew efforts to consolidate gains and sustain our reform agenda as detailed in the MEFP of April 29, 2011.

Table 3.

Guinea-Bissau: Structural Benchmarks Under the ECF

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Table 4.

Guinea-Bissau: Quantitative Indicators for the ECF Program for 2011-2012 Quarterly Targets1

(Cumulative, CFAF millions)

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Cumulative from January 1. The definition of the aggregates and adjustors is provided in the Technical Memorandum of Understanding (TMU).

Performance criteria (PC) are defined for June and December. March and September are indicative. All PC are ceillings and PC 3, 4, and 5 apply continously.

Table 5.

Guinea-Bissau: Structural Benchmarks Under the ECF

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Table 6.

Guinea-Bissau: Structural Reform Measures for 2012

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  • (i) Mobilizing more revenue. The government is improving substantially the coverage of our current spending with our own revenue. Compared to a ratio of fiscal revenues to current spending of less than 75 percent in 2008, the 2012 budget envisages the full coverage of current spending with fiscal revenues. Revenue mobilization efforts will continue to take place on various fronts including tax administration and customs:

    1. On tax administration, the government will prepare a report on tax stop-filers during the period 2010-11 (new structural benchmark-June 2012); and to double the filing rate of self-assessed taxes to 80 percent, which will ensure the effectiveness of tax collection (new structural benchmark-December 2012). The number of contributors from group of large taxpayers (Group A) would be raised to 800.

    2. On customs, the government will expand SYDONIA ++ to Bafata and Gabu, (new structural benchmark-December 2012) as well as to reinforce the operations of the customs in SAFIN including the construction of warehouses to inspect trade coming from the sub-region, aiming at strengthening the supervision of land trade.

    3. On revenue administration, a comprehensive survey on all nontax revenues not collected by the Treasury will be prepared and attached to the annual laws (new structural benchmark-June 2012). Also public accountants will be appointed to report and verify nontax revenues in each line ministry.

    4. Other initiatives to revenue mobilization that will be undertaken in 2012 include: registering at the large taxpayer office all merchants with total annual imports of exports above FCFA 40 million; adopting indicative ceiling to control volume of exempted fuel (new structural benchmark-June 2012).

  • (ii) Modernizing public administration and improving public services. Efforts to revamp the public administration are underway. Personnel management software (SIGRHAP) will start operating in November 2011. To maintain the momentum on the public administration reform, the government will:

    1. complete the work of the unified payroll system for ministries of interior and defense by end-March 2012 (rephased benchmark).

    2. approve regulations on human resources management for public employees that includes career development, performance and retirement (new structural benchmark-June 2012).

    3. enforce retirement and reduce personnel according to the medium-term plan.

    4. operationalize the procurement services for public tender with the aim to improve the efficiency of government purchases.

  • (iii) Boosting private sector development. The government wants to create an environment that could attract private investment and promote economic diversification. To achieve this goal, the government will:

    1. approve an action plan to identify and remove impediments to private sector development (new structural benchmark-June 2012).

    2. submit a new mining code to the parliament setting up regulations loyalties for mining exploration.

    3. broaden the One-Stop-Shop will broaden its activities to improve its services to business including training.

  • (iv) Keeping up the momentum of security sector reform. The security sector reform is underway following several agreements between Guinea-Bissau and its partners, including the UN, ECOWAS, and Community of Portuguese Language Countries (CPLP). In 2012, the government will:

    1. operationalize the pension fund for the defense and police sectors, including the retirement of the first group of the police and the armed forces, once the support from development partners becomes available.

    2. implement the new regulation of the creation of the National Guard in 2012.

  • (v) Strengthening debt management. The government will adopt a debt management system (SYGADE) by end of 2011. In 2012, the government will:

    1. strengthen the public debt management unit by improving interface among users, the BCEAO and the Ministry of Finance (new structural benchmark-December 2012).

D. Monetary Policy

14. Monetary policy will continue to be pursued within the WAEMU framework. The monetary policy framework has set an inflation objective of 2 (±1) percent over a 24-month horizon.

E. Debt Policies

15. Efforts are being undertaken to complete the HIPC process with all creditors. Following the Paris Club agreement in May to provide extensive debt relief to Guinea-Bissau, we are working on bilateral agreements with Paris Club creditors, aiming at finalizing them by the end of 2011, and are seeking comparable treatment from all other creditors.

16. The government stepped up efforts to clear the long-standing domestic arrears. The government intends to continue making annual payments consistent with available resources, and will finalize verifying the audit of the 2000–2007 arrears by end-June 2012.

17. The government has requested a rescheduling of debts owed to the Central Bank of West African States (BCEAO). A request for a deferral of payment and better terms on debts owed to the BCEAO was presented to the new BCEAO governor and negotiations are ongoing.

IV. Program Monitoring

18. The third year of the program covers the 12 months from January 1, 2012, to December 31, 2012. The program will be monitored using quarterly quantitative indicators and structural benchmarks including 5th and 6th reviews, as well as semiannual reviews and the quantitative performance criteria presented in Table 4. Tables 5 and 6 contain a list of structural measures identified by the government, including the structural benchmarks for the third and fourth review. The definitions of quantitative performance criteria and benchmarks are in the attached TMU. The government expects the fourth review to take place in May 2012 and the fifth review is expected to take place in December 2012.

Attachment II. Technical Memorandum of Understanding

Bissau

November 14, 2011

1. This memorandum updates the Technical Memorandum of Understanding of April 29, 2011 and describes the definitions of the quantitative and structural performance criteria, indicative targets, and structural benchmarks to monitor the program supported by an arrangement under the Extended Credit Facility (ECF). It also specifies the agreed periodicity and deadlines for transmission of data to IMF staff for program monitoring.

Quantitative Indicators and Adjustors
A. Quantitative Indicators

2. The quantitative indicators are as follows:

  • a. Cumulative floors on government tax revenue

  • b. Cumulative ceilings on the domestic primary fiscal deficit (on a commitment basis)

  • c. Cumulative ceiling on the amount of nonregularized expenditures (DNTs).

  • d. Cumulative floor on social and other priority spending

  • e. Cumulative ceilings on the change in net domestic financing of the budget

  • f. Cumulative ceiling on new domestic arrears of the government, including wage arrears

  • g. Cumulative ceilings on new nonconcessional external debt contracted or guaranteed by the government

  • h. Cumulative ceiling on new external short term debt

  • i. Cumulative ceiling on new external payment arrears.

Quantitative indicators are set for end-March, end-June, end-September, and end-December. Quantitative performance criteria are set for end-June and end-December 2011–12 for indicators (e) through (i). Indicators for new nonconcessional external debt, new external short-term debt, and new external payment arrears are continuous.

Definitions and computation

3. Government. Unless otherwise indicated, “Government” means the central administration of the Republic of Guinea-Bissau and does not include any local administration, the central bank, or any other public or government-owned entity with autonomous legal personality not included in the government flow-of-funds table (TOFE).

4. The targeted floor on government tax revenues includes direct and indirect taxes, as well as recovery of tax arrears and additional revenue efforts.

5. The domestic primary fiscal deficit on a commitment basis is calculated as the difference between government revenue and domestic primary expenditure on a commitment basis. Government revenue includes all tax and nontax receipts and excludes external grants. Domestic primary expenditure consists of current expenditure plus domestically financed capital expenditure, excluding all interest payments. Government commitments include all expenditure for which commitment vouchers have been approved by the Ministry of Finance; automatic expenditure (such as wages and salaries, pensions, utilities, and other expenditure for which payment is centralized); and expenditure by means of offsetting operations.

6. New domestic arrears of the government are defined as accounts payable (rest-a-payer) accumulated during the year, still outstanding one month after the quarter for wages and salaries (including pensions), and three months after for goods and services and transfers, at end-March, end-June, end-September, and end-December.

7. Nonregularized expenditures are defined as any treasury outlay not classified in the expenditure tables presented by the National Budget Directorate.

8. Net domestic financing consists of bank and nonbank financing (Table 3). Bank financing consists of net changes in the balances of the treasury accounts at the BCEAO (excluding net disbursement from the IMF) and commercial banks (excluding balances in those accounts that are not available for budget financing, such as accounts held under double signature arrangements with donors) and in the outstanding amounts of loans, including T-bills, from the BCEAO and commercial banks, local and regional. Nonbank financing encompasses privatization receipts and any other financial debt held outside the banking system other than new domestic arrears.

Contracting or Guaranteeing of New Nonconcessional External Debt by the Government.

9. Definition of debt. For the purposes of the relevant performance criteria, the definition of debt is set out in Executive Board Decision No.6230-(79/140), Point 9, as revised on August 31, 2009 (Decision No. 14416-(09/91)).

  1. the term “debt” will be understood to mean a current, i.e., not contingent, liability, created under a contractual arrangement through the provision of value in the form of assets (including currency) or services, and which requires the obligor to make one or more payments in the form of assets (including currency) or services, at some future point(s) in time; these payments will discharge the principal and/or interest liabilities incurred under the contract. Debts can take a number of forms, the primary ones being as follows:

    1. loans, i.e., advances of money to the obligor by the lender made on the basis of an undertaking that the obligor will repay the funds in the future (including deposits, bonds, debentures, commercial loans and buyers’ credits) and temporary exchanges of assets that are equivalent to fully collateralized loans under which the obligor is required to repay the funds, and usually pay interest, by repurchasing the collateral from the buyer in the future (such as repurchase agreements and official swap arrangements);

    2. suppliers’ credits, i.e., contracts where the supplier permits the obligor to defer payments until sometime after the date on which the goods are delivered or services are provided; and

    3. leases, i.e., arrangements under which property is provided which the lessee has the right to use for one or more specified period(s) of time that are usually shorter than the total expected service life of the property, while the lessor retains the title to the property. For the purpose of the guideline, the debt is the present value (at the inception of the lease) of all lease payments expected to be made during the period of the agreement excluding those payments that cover the operation, repair or maintenance of the property.

  2. Under the definition of debt above, arrears, penalties, and judicially awarded damages arising from the failure to make payment under a contractual obligation that constitutes debt are debt. Failure to make payment on an obligation that is not considered debt under this definition (e.g., payment on delivery) will not give rise to debt.

10. Debt guarantees. For the purposes of the relevant performance criteria, the guarantee of a debt arises from any explicit legal obligation of the government to service a debt in the event of nonpayment by the debtor (involving payments in cash or in kind).

11. Debt concessionality. For the purposes of the relevant performance criteria, a debt is considered concessional if it includes a grant element of at least 35 percent;1 the grant element is the difference between the present value (PV) of debt and its nominal value, expressed as a percentage of the nominal value of the debt. The PV of debt at the time of its contracting is calculated by discounting the future stream of payments of debt service due on this debt.2 The discount rates used for this purpose are the currency specific commercial interest reference rates (CIRRs), published by OECD.3 For debt with a maturity of at least 15 years, the ten-year-average CIRR is used to calculate the PV of debt and, hence, its grant element. For debt with a maturity of less than 15 years, the six-month average CIRR is used. The margins for differing repayment periods (0.75 percent for repayment periods of less than 15 years, 1 percent for 15 to 19 years, 1.15 percent for 20 to 29 years, and 1.25 percent for 30 years or more) are added to the ten-year and six-month CIRR averages.

12. External debt. For the purposes of the relevant performance criteria, external debt is defined as debt borrowed or serviced in a currency other than the CFA franc. This definition also applies to debt among WAEMU countries.

13. Debt-related performance criteria. The relevant performance criteria apply to the contracting and guaranteeing of new nonconcessional external debt by the government. The criteria apply to debt and commitments contracted or guaranteed for which value has not yet been received. The criteria also apply to private debt for which official guarantees have been extended and which, therefore, constitute a contingent liability of the government. The performance criteria are measured on a cumulative basis from the time of approval of the ECF by the Executive Board. PCs will be monitored on a continuous basis. No adjuster will be applied to these criteria.

14. Ceiling on short-term external debt newly contracted or guaranteed by the government. Short-term external debt is external debt with the contractual term of less than one year. Debt-relief operations and treasury bills issued in CFA francs on the WAEMU regional market are excluded from this performance criterion. In the context of the program, the government and public enterprises will not contract, or guarantee, short-term external debt. This performance criterion is monitored on a continuous basis.

15. Ceiling on new external payment arrears. External payment arrears are defined as external payments due but not paid on the due date. In cases where a creditor has granted a grace period after the contractual due date, arrears are incurred following the expiration of the grace period. Under the program, the government undertakes not to accumulate arrears on its external debt, except those arising from government debt that is being renegotiated with creditors, including non-Paris Club bilateral creditors. This performance criterion is monitored on a continuous basis.

16. Reporting requirements. The government will report any new external borrowing and its terms to Fund staff as soon as external debt is contracted or guaranteed by the government, but no later than within two weeks of such external debt being contracted or guaranteed.

17. Social and other priority spending is defined as total current expenditures in the education, health, and agricultural sector, and domestically financed capital spending.

B. Adjustors

18. The following adjustors will be in effect:

  • i. The ceiling on domestic financing will be increased for shortfalls in external budget support, and fishing compensation, by the amount of the shortfall up to CFAF3.5 billion. The program assumes the following path on amounts of external budget support, and fishing compensation.4

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  • ii. The ceiling on domestic financing for March, June, and September will be increased for payment of previous years’ arrears in excess of programmed amounts up to a maximum of CFAF1.85 billion. The program assumes the following path on arrears payments from previous years:

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  • iii. The ceiling on the domestic primary deficit will be increased in the case of lower than programmed disbursement of fishing compensation, by the amount of the shortfall up to a maximum of CFAF3 billion. The program assumes the following path on amounts of fishing compensation.

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1

Compared to the program approved in the first review (IMF Country Report No. 10/379), the fiscal program for 2011 was revised in the second review in May 2011 (IMF Country Report No. 11/67), reflecting the higher revenue base from 2010 and budget support from Angola disbursed in March 2011.

2

During consultations under Article 96 of the Cotonou Agreement in March 2011, the authorities and the EU agreed on a matrix of commitments for resuming budget support to Guinea-Bissau, including security sector reform and the appointment of military personnel. But the authorities have yet to implement those commitments.

3

The opportunities and challenges for developing the domestic processing of cashew nuts in Guinea-Bissau was assessed by the World Bank as part of a 2009 Diagnostic Trade Integration Study (DTIS), Report No. 54145-GW.

1

The following reference on the IMF website creates a link to a tool that allows for the calculation of the grant element of a broad range of financing packages: http://www.imf.org/external/np/pdr/conc/calculator.

2

The calculation of concessionality will take into account all aspects of the debt agreement, including maturity, grace period, payment schedule, upfront commissions, and management fees.

3

For debts in foreign currencies for which the OECD does not calculate a CIRR, calculation of the grant element should be based on the composite CIRR (weighted average) of the currencies in the SDR basket.

4

For this TMU, the CFAF/euro exchange rate is 655.956 and the CFAF/US$ exchange rate is 464.

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Cover IMF Staff Country Reports
Guinea-Bissau: Third Review Under the Three-Year Arrangement Under the Extended Credit Facility and Financing Assurances Review: Staff Report; Joint IMF/World Bank Debt Sustainability Analysis; Informational Annex; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Guinea-Bissau
Author:
International Monetary Fund
Volume/Issue:
Volume 2011: Issue 355
Publisher:
International Monetary Fund
ISBN:
9781463928513
ISSN:
1934-7685
Pages:
81
DOI:
https://doi.org/10.5089/9781463928513.002
Figure 1.

Guinea-Bissau: Macroeconomic Developments, 2006–11
Figure 1.

Guinea-Bissau: Macroeconomic Developments, 2006–11
Figure 2.

Guinea-Bissau: Medium-Term Outlook, 2009–14
Figure 3.

Guinea-Bissau: Consumer Price Inflation and Import Prices