IMF Executive Board Completes Fourth Review Under the ECF Arrangement, Approves US$ 4.3 Million Disbursement, and Concludes 2017 Article IV Consultation with 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


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

The Executive Board of the International Monetary Fund (IMF) today completed the fourth review of the arrangement under the Extended Credit Facility (ECF).1 The completion enables the release of SDR 3.03 million (about US$4.3 million), bringing total disbursements under the arrangement to SDR14.01 million (about US$19.8 million). The Executive Board also concluded the 2017 Article IV Consultation.2

Guinea-Bissau’s three-year ECF arrangement for SDR 17.04 million (60 percent of quota) was approved by the Executive Board on July 10, 2015 (see Press Release No. 15/331). The ECF-supported program aims to restore macroeconomic stability and improve efficiency in public service delivery to foster inclusive growth.

Guinea-Bissau’s commitment to the ECF-supported program is strong and the results are apparent. All performance criteria and indicative targets for end-June were met as were most structural benchmarks. Two 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.

The economy is growing strongly and the fiscal position has improved markedly. Supported by favorable terms of trade, real GDP growth averaged almost 6 percent in 2015-2016, with a surplus on the external current account and inflation below 2 percent a year. Public financial management has improved and the 2017 fiscal deficit is projected to fall under 2 percent of GDP, more than halving the 2016 level.

The outlook is broadly favorable, with growth projected at 5 percent over the medium term. Ongoing investments in road and other infrastructure, improvements in electricity and water supply, and policies to improve the business environment are contributing to the positive momentum. The outlook is, however, subject to significant risks stemming from the country’s history of fragility, continued political tensions, and undiversified export base. Moreover, weak financial intermediation, with banks burdened by high levels of nonperforming loans and still unresolved issues from the voided 2015 bank bailout, are a drag on growth.

Following the Executive Board discussion, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, made the following statement:

“Economic policy implementation in Guinea-Bissau has been satisfactory and in line with the objectives of the Fund-supported program. Economic growth has remained strong, buoyed by high cashew prices, while improvements in fiscal management have bolstered macroeconomic stability.

“The authorities’ determination to minimize the costs to the state while following through with needed steps to resolve the voided 2015 bank bailout, as well as ensure compliance with prudential norms, is welcome. Strengthening the banking system is critical for financial sector stability and healthy financial intermediation, and minimum capital requirements should be rigorously enforced.

“Low government revenue indicates a need to strengthen tax and customs administration and carefully manage public expenditures. Tailored structural reforms will be necessary to create fiscal space for priority infrastructure and social spending and ensure that stepped-up spending delivers the desired results. Borrowing for priority projects should continue to be contained and rely to the maximum extent possible on concessional financing. Plans to improve the management of the public electricity and water utility companies and ensure financial transparency in state-owned enterprises are welcome.

“Improvements in the business environment will be critical to maintaining the growth momentum, creating jobs, and reducing poverty. To encourage private investment and enable economic diversification, stepped-up efforts are needed to entrench the rule of law, promote policy stability, and instill transparency in government affairs. In parallel, the authorities need to advance their initiatives to reduce corruption and rent seeking, and combat money laundering and the financing of terrorism.”

Executive Board Assessment3

Executive Directors agreed with the thrust of the staff appraisal. They welcomed the authorities’ commitment to the Fund-supported program and progress achieved, including strong economic growth and an improved fiscal position. Directors noted the buoyant cashew sector activity, supported by rising sales prices, which has helped improve incomes and alleviate poverty. They encouraged the authorities to leverage the currently favorable economic conditions to advance reforms to strengthen foundations for longer-term development, by addressing gaps in infrastructure, strengthening social spending, and improving the business environment.

Directors welcomed the authorities’ commitment to accelerate structural reforms to reinforce domestic revenue mobilization, further fiscal discipline, and improve the quality of public spending. This would enable a step up in priority infrastructure and social spending. Considering the recent strengthening of public financial management, Directors encouraged the authorities to steadfastly adhere to their weekly cash management meetings while also enhancing procedures for project selection and developing a supporting planning and execution framework.

To sustain strong and inclusive economic growth, Directors underlined the need for private sector development and diversification. They highlighted the need to address gaps in electricity and transport infrastructure. They also stressed the importance of policy stability and rule of law. Directors encouraged the authorities to seek support of their development partners, notably through technical assistance, to improve management of the public power and water utility, EAGB, and to ensure value for money in public investments.

Directors emphasized the importance of anchoring debt sustainability by seeking grants and loans on highly-concessional terms for financing priority projects. Careful borrowing will be essential in the light of Guinea-Bissau’s high level of public debt and its vulnerability to shocks. Directors welcomed recent progress on resolving long-standing external arrears. They encouraged the authorities to further strengthen debt management, shun contingent liabilities, and instill financial discipline in state-owned enterprises through regular financial reporting and audits.

Directors underscored that strengthening the banking system and financial inclusion are critical for the business environment and poverty alleviation. They commended the authorities’ commitment to minimizing costs to the state while following through with necessary steps to resolve the voided bank bailout of 2015 and ensure adequate capitalization of banks. Directors emphasized the need to safeguard financial stability through remedial actions and strict enforcement of prudential norms in collaboration with the regional bank regulator. They noted that developing a national plan for financial inclusion would support efforts to deepen the financial system.

Directors viewed that Guinea-Bissau’s structural reform agenda remains appropriate to support macroeconomic stability and inclusive growth. They urged the authorities to firmly entrench good and transparent governance to strengthen the business environment and encourage private investment. Directors encouraged the authorities to move forward with initiatives to reduce corruption, including by strengthening the AML/CFT framework.

Directors stressed the importance of improving the quality and timeliness of Guinea-Bissau’s economic statistics. They encouraged the authorities to continue to improve coordination across institutions and ensure adequate allocation of resources for the compilation and dissemination of statistical data.

It is expected that the next Article IV Consultation with Guinea-Bissau will be held in accordance with the Executive Board decision on consultation cycles for members with Fund arrangements.

Table 1.

Guinea-Bissau: Selected Economic Indicators1

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

Values exclude the 2015 bank bailout of CFA 34.2 billion. A final determination by the courts on the legality of the bailout contracts is still pending.

Contribution to the growth of broad money in percent.


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. For more details, see


Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.


At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: