Front Matter Page
IMF Country Report No. 17/380
GUINEA-BISSAU
2017 ARTICLE IV CONSULTATION AND FOURTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND FINANCING ASSURANCES REVIEW—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR GUINEA-BISSAU
December 2017
In the context of the combined Article IV Consultation and Fourth Review Under the Extended Credit Facility Arrangement, and Request for Extension and Augmentation of Access, the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board and summarizing the views of the Executive Board as expressed during its December 11, 2017 consideration of the staff report on issues related to the Article IV Consultation and the IMF arrangement.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on December 11, 2017, following discussions that ended on October 3, 2017, with the officials of Guinea-Bissau on economic developments and policies underpinning the IMF arrangement under the Extended Credit Facility. Based on information available at the time of these discussions, the staff report was completed on November 21, 2017.
A Debt Sustainability Analysis prepared by the staffs of the IMF and the International Development Association (IDA).
An Informational Annex prepared by the IMF.
A Statement by the Executive Director for Guinea-Bissau.
The documents listed below have been or will be separately released:
Letter of Intent sent to the IMF by the authorities of Guinea-Bissau*
Memorandum on Economic and Financial Policies by the authorities of Guinea-Bissau*
Technical Memorandum of Understanding*
Selected Issues Paper
* Also included in Staff Report.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
© 2017 International Monetary Fund
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Front Matter Page
GUINEA-BISSAU
STAFF REPORT FOR THE 2017 ARTICLE IV CONSULTATION AND FOURTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND FINANCING ASSURANCES REVIEW
November 21, 2017
Executive Summary
Background: The three-year arrangement under the Extended Credit Facility (ECF) was approved on July 10, 2015. Guinea-Bissau obtained a primary disbursement (SDR 2.84 million, 10 percent of quota) upon approval of the arrangement and additional disbursements (totaling SDR 8.14 million, 29 percent of quota) following approval of the combined first and second review on December 2, 2016, and the third review on July 6, 2017.
Context: A fragile state, Guinea-Bissau has seen a strong pickup in economic activity since 2014, despite continued political tensions and reduced external financial assistance. Growth has been supported by a calm security situation and favorable terms of trade developments. Political tensions resulted in multiple changes of government during 2015–16 and Parliament has not been sitting since late 2015.
Policy challenges: Sustained and inclusive growth will require improvements in the business environment as well as a strengthening of revenue mobilization to enable priority social and infrastructure spending. High levels of non-performing loans and legacies from the voided bank bailout of 2015 need to be addressed to bolster financial intermediation, and export diversification is needed to reduce reliance on cashew nuts.
Program performance: Program implementation has been good, with all performance criteria and indicative targets for the fourth review met. Two structural benchmarks, relating to debt management operations and financial reporting on the public electricity company, were not met but are likely to be implemented with delay.
Staff supports completion of the 2017 Article IV Consultation, fourth review under the ECF arrangement, and the financing assurances review: The equivalent of SDR 3.03 million (11 percent of quota) will be made available upon Executive Board completion of the fourth review.
Approved By
Roger Nord (AFR) and Johannes Wiegand (SPR)
Discussions took place in Bissau during September 10–October 3, 2017. The staff team comprised Tobias Rasmussen (head), Elena Arjona Pérez, Cristina Cheptea, Francis Kumah, Torsten Wezel (all AFR). Keyra Primus (FAD), and Oscar Melhado (IMF Resident Representative in Bissau). Romão Varela (OED) participated in the discussions. Gaston Fonseca and Gemilia Pereira (both IMF Res Rep office) assisted the mission. The team met with His Excellency, the President of Guinea-Bissau, José Mário Vaz; Prime Minister, Umaro Sissoco Embaló; Finance Minister, Joใo Fadia; National Director of the Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO), Helena Nosolini Embaló; Chairman of the Joint Chiefs of Staff, Biaguê Na N’Tam; Attorney General, António Mam; and other senior officials and representatives of the private sector, civil society, and development partners. The team organized presentations of analytical work and participated in a conference on sustainable inclusive growth.
Contents
ACRONYMS
CONTEXT: OVERCOMING FRAGILITY
RECENT DEVELOPMENTS AND PROGRAM PERFORMANCE
OUTLOOK AND RISKS
ARTICLE IV POLICY DISCUSSIONS: DEEPENING REFORMS FOR INCLUSIVE GROWTH
A. Building Capacity and Expanding Fiscal Space
B. Promoting Strong and Inclusive Growth
C. Strengthening Financial Intermediation and Inclusion
D. Maintaining Prudent Borrowing Policies
E. Statistical Issues
F. Governance
G. Other Surveillance Issues
PROGRAM ISSUES
STAFF APPRAISAL
BOXES
1. The 2015-Bank Bailouts and Aftermath
2. Quantitative Performance Criteria and Indicative Targets
3. External Stability Assessment
4. Electricity Supply
FIGURES
1. Recent Economic Developments
2. Fiscal and Credit Developments
3. Medium-Term Outlook
TABLES
1. Selected Economic Indicators
2. Balance of Payments (CFAF billions)
3a. Central Government Operations (CFAF billions)
3b. Central Government Operations (Percent of GDP)
4. Monetary Survey
5. Financial Soundness Indicators of the Banking System
6. Quantitative Performance Criteria and Indicative Targets for 2017
7a. Past Structural Benchmarks Under the ECF Program, 2017
7b. Structural Benchmarks Under the ECF Program, 2017–18
8. Schedule of Disbursements Under the ECF Arrangement, 2015–18
9. Indicators of Capacity to Repay the Fund
10. Table of Common Indicators Required for Surveillance
ANNEXES
I. Recommendations from the 2015 Article IV Consultation
II. Capacity Building Amid Fragility
III. Risk Assessment Matrix
IV. External Stability Assessment
APPENDIX
I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies
Attachment II. Technical Memorandum of Understanding
Acronyms
| AfDB | African Development Bank |
| AML/CFT | Anti-Money Laundering and Combatting Financing of Terrorism |
| ASYCUDA | Automated Systems for Customs Data |
| BADEA | Arab Bank for Economic Development in Africa |
| BCEAO | Central Bank of West African States |
| BOAD | Banque Ouest Africaine de Développement |
| CFAF | Communauté Financière Africaine Franc (CFA Franc) |
| DNTs | Despesas Não Tituladas |
| DSA | Debt sustainability analysis |
| EAGB | Eletricidade e Águas da Guiné-Bissau |
| ECF | Extended Credit Facility |
| ECOWAS | Economic Community of West African States |
| EU | European Union |
| CENTIF | Financial Intelligence Unit |
| FATF | Financial Action Task Force |
| FUNPI | Fund to promote the industrialization of agricultural products |
| GDP | Gross domestic product |
| GIABA | Intergovernmental Action Group against Money Laundering |
| MFI | Micro finance institution |
| NGO | Non-government organization |
| NPL | Non-performing loan |
| PFM | Public financial management |
| PIP | Public investment program |
| PRSP | Poverty Reduction Strategy Paper |
| SIGRHAP | Personnel Management System |
| SB | Structural Benchmark |
| SIGFIP | Système Intégré de Gestion des Finances Publiques |
| SSA | Sub-Saharan Africa |
| SYDONIA | Système de Gestion de Douanes Automatisé |
| SYGADE | Debt Management System |
| TA | Technical Assistance |
| TOFE | Tableau des Opérations Financières de l’Etat |
| UN | United Nations |
| UNCTAD | United Nations Conference on Trade and Development |
| VAT | Value added tax |
| WAEMU | West African Economic and Monetary Union |
Front Matter Page
GUINEA-BISSAU
STAFF REPORT FOR THE 2017 ARTICLE IV CONSULTATION AND FOURTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND FINANCING ASSURANCES REVIEW—DEBT SUSTAINABILITY ANALYSIS
November 21, 2017
Approved By
Roger Nord and Johannes Wiegand (IMF) and Paloma Anos Casero (World Bank)
Prepared jointly by the Staffs of the International Monetary Fund and the International Development Association.1, 2
Guinea-Bissau faces a moderate risk of debt distress, based on an assessment of public and publicly guaranteed external debt, but a heightened overall risk of debt distress, reflecting the currently high level of total public debt. Compared to last year’s Debt Sustainability Analysis (DSA) update,3 the current assessment scales down non-concessional domestic borrowing to a more realistic, affordable and sustainable trajectory, in line with the authorities’ commitment to prioritize concessional borrowing and grants. It also assumes higher medium-term economic growth, premised on favorable external conditions and prudent domestic policies. Under the baseline scenario, all indicators are below their indicative policy-dependent thresholds throughout the projection period. However, the PV of debt-to-exports ratio breaches its threshold for an extended period under the most extreme shock scenario. Overall public debt, while projected to decline in the long term, is slightly above its indicative benchmark and is expected to remain so over the next three-four years. There is therefore a need to pursue prudent fiscal and debt management policies and strengthen debt management capacity. The results of the DSA are contingent on the authorities successfully implementing structural reforms, improving the business environment to boost production and exports, and continuing to rely mainly on concessional borrowing.
Front Matter Page
GUINEA-BISSAU
STAFF REPORT FOR THE 2017 ARTICLE IV CONSULTATION AND FOURTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND FINANCING ASSURANCES REVIEW—INFORMATIONAL ANNEX
November 21, 2017
Prepared By
The African Department
(In Consultation with Other Departments)
Contents
FUND RELATIONS
WORLD BANK GROUP RELATIONS
AFRICAN DEVELOPMENT BANK GROUP RELATIONS
STATISTICAL ISSUES
Front Matter Page
Press Release No. 17/481
FOR IMMEDIATE RELEASE
December 11, 2017
International Monetary Fund
Washington, D.C. 20431 USA
Telephone 202-623-7100
Fax 202-623-6772
