On June 1, 2018, the Executive Board of the International Monetary Fund (IMF) completed the fifth review of Guinea-Bissau’s performance under an economic program supported by an Extended Credit Facility (ECF) arrangement. The completion of the review enables the release of SDR3.028 million (about US$4.3 million), bringing total disbursements under the arrangement to SDR17.04 million (about US$24.2 million).

In addition, the Executive Board approved the authorities’ request for a one-year extension of the ECF arrangement to July 9, 2019 and an augmentation of access by SDR 5.68 million. The extension and augmentation will help anchor macroeconomic stability during the upcoming election period, support reforms focused on revenue mobilization and addressing gaps in essential infrastructure, and help meet balance of payments needs. It will bring Guinea-Bissau’s total access under the current arrangement to SDR 22.72 million (about US$32.2 million) or 80 percent of quota.

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).

Program implementation for the fifth review has been good. All performance criteria and indicative targets were met, as were six of eight structural benchmarks, with one of the remaining two benchmarks subsequently completed and the other underway.

Economic activity has remained robust. Real GDP grew by an estimated 5.9 percent in 2017, with consumer price inflation of 1.1 percent, an external current account deficit of 0.5 percent of GDP, and a fiscal deficit (cash basis) of 1.5 percent of GDP. The outlook is broadly positive, with growth projected at 5.3 percent in 2018, but subject to significant risks stemming from the still fragile political environment and adverse terms of trade developments.

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

“Robust economic growth in Guinea-Bissau, at around six percent for the past three years, has been supported by favorable terms of trade and improved economic management. The authorities’ program implementation has been strong, with a notable improvement in fiscal outcomes.

“The outlook is broadly positive, with the recent consensus-based agreement on a new government offering the prospect of greater political stability. At the same time and posing new challenges, the terms of trade gains that supported economic expansion for the past three years have partially reversed.

“Maintaining a strong reform drive will be crucial for continued improvements in outcomes. A further strengthening of tax and customs administration is essential for the domestic revenue mobilization needed to undertake priority infrastructure and social spending. Moreover, planning and execution frameworks will need to be enhanced for scaled-up spending to have the desired results.

“Continued progress toward improving conditions for private enterprise will also be important. Boosting private investment depends on effectively reducing regulatory uncertainty, combatting corruption and rent seeking, and enhancing transparency in public administration. Overcoming the longstanding problems in electricity provision is also essential and requires fundamental reform of the public power utility.

“Strengthening the banking system will be critical for maintaining financial sector stability and expanding financial intermediation. Decisive action toward any bank that remains undercapitalized by the end-June deadline extended by the Banking Commission will be important, and any intervention should minimize the costs to the state and adhere to best international practices, including avoidance of market distortions and conflicts of interest.

“The one-year extension and augmentation of the ECF arrangement will help anchor macroeconomic stability during the upcoming election period, support reforms focused on mobilizing revenue and addressing gaps in essential infrastructure, and help meet balance of payments needs.”

.....

Table 1.

Guinea-Bissau: Selected Economic and Financial Indicators¹

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

¹Excludes the 2015 bank bailout of CFAF 34.2 billion. A final determination by the courts on the legality of the bailout contracts remains pending.

²Contribution to the growth of broad money in percent.

Table 1.

Guinea-Bissau: Selected Economic and Financial Indicators¹

				2015	2016	2017		2018		2019	2020	2021	2022	2023
					Pre l.	EBS/17/116	Est.	EBS/17/116	Proj.	Projections
National accounts and prices
	Real GDP at market prices			6.1	6.3	5.5	5.9	5.0	5.3	5.1	5.0	5.0	5.0	5.0
	Real GDP per capita			3.8	4.0	3.2	3.6	2.7	3.0	2.9	2.7	2.7	2.7	2.8
	GDP deflator			12.1	6.1	7.2	5.9	1.6	0.1	2.2	2.4	2.5	2.8	2.8
	Consumer price index (annual average)			1.5	1.5	2.2	1.1	2.3	2.0	2.2	2.3	2.5	2.6	2.8
External sector
	Exports, f.o.b. (based on US$ values)			51.8	9.6	24.5	18.7	7.1	4.0	9.5	8.8	8.4	8.5	8.4
	Imports, f.o.b. (based on US$ values)			−3.5	11.2	30.0	23.1	13.2	15.7	8.7	8.8	8.4	8.5	8.4
	Export volume			19.1	−6.9	−8.6	−5.2	5.5	7.0	6.6	5.8	5.2	5.1	4.8
	Import volume			15.7	14.6	18.6	13.3	10.3	8.2	7.4	7.2	6.6	6.9	6.9
	Terms of trade (deterioration = -)			54.4	13.9	28.7	31.2	−0.1	−7.4	2.4	2.4	2.3	2.7	2.9
	Real effective exchange rate (depreciation = -)			−2.5	1.9	…	−0.1	…	…	…	…	…	…	…
	Exchange rate (CFAF per US$; average)			591.2	592.8	…	580.9	…	…	…	…	…	…	…
Government finances
	Domestic revenue (excluding grants)			29.4	−0.6	8.7	19.1	22.9	16.2	15.7	12.7	11.6	12.2	12.8
	Domestic revenue (excluding grants and one-offs)			30.4	5.2	10.0	20.5	22.9	13.7	18.2	12.7	11.6	12.2	12.8
	Total expenditure			11.3	0.9	−5.2	6.1	15.7	15.2	12.6	10.8	11.1	11.3	11.2
		Current expenditure		5.0	8.8	−12.2	−3.5	12.3	8.2	16.0	10.9	10.7	12.7	11.9
		Capital expenditure		25.5	−14.2	11.7	29.2	22.3	27.7	7.4	10.5	11.8	9.0	9.9
Money and credit
	Net domestic assets2			18.2	−2.5	−9.7	6.1	0.6	−0.4	2.0	1.6	1.7	1.9	1.8
		Of which:
			Credit to government	4.6	1.8	−0.5	−2.8	0.0	0.5	0.3	−0.4	−0.3	−0.4	−0.5
			Credit to the economy	13.0	2.2	−8.3	−7.7	1.5	1.6	1.7	2.0	2.0	2.2	2.3
	Velocity (GDP/broad money)			2.1	2.1	2.3	2.2	2.3	2.2	2.2	2.2	2.2	2.2	2.3
Investments and savings
	Gross investment			8.1	7.8	8.5	10.5	8.7	12.7	12.8	13.3	13.7	13.8	14.0
		Of which: government investment		8.0	6.1	6.1	7.0	7.0	8.5	8.5	8.7	9.1	9.1	9.3
	Gross domestic savings			3.4	3.0	2.9	6.2	2.5	6.2	6.9	7.6	8.4	8.8	9.3
		Of which: government savings		−0.5	−2.5	0.6	0.6	1.5	1.2	1.3	1.6	1.8	1.8	2.0
	Gross national savings			9.9	9.1	7.8	10.0	6.4	9.4	10.6	11.1	11.6	11.8	12.1
Government finances
Total revenue				13.7	12.1	11.7	12.8	13.5	14.1	15.2	15.9	16.5	17.2	17.9
	Total domestic primary expenditure			15.2	14.1	11.3	12.3	12.8	12.8	14.2	14.9	15.6	16.4	17.2
	Domestic primary balance			−1.5	−2.0	0.4	0.5	0.8	1.3	1.0	1.0	0.9	0.8	0.8
	Overall balance (commitment basis)
		Including grants		−3.0	−4.7	−1.7	−1.3	−1.9	−2.5	−2.2	−2.0	−2.1	−2.1	−1.9
		Excluding grants		−9.4	−8.6	−5.8	−6.7	−5.5	−7.3	−7.2	−7.1	−7.3	−7.4	−7.3
External current account				1.9	1.3	0.0	−0.5	−2.3	−3.2	−2.3	−2.2	−2.1	−2.0	−1.8
	Excluding official current transfers			1.0	1.2	−0.4	−0.8	−2.3	−3.2	−2.3	−2.2	−2.1	−2.0	−1.8
Stock of central government debt				51.7	53.3	49.2	50.1	48.3	50.3	48.8	47.4	46.0	44.6	43.2
	Of which: external debt			15.1	14.7	12.5	12.4	13.0	12.0	12.2	12.8	14.1	15.3	16.1
Memorandum item:
Nominal GDP at market prices (CFAF billions)				619.7	698.7	780.7	784. 0	832.7	826. 5	888. 6	955. 4	1028 .5	1110 .0	1198 .4
WAEMU gross official reserves (billions of US$)				12.4	10.4	…	13.0	…	…	…	…	…	…	…
	(percent of broad money)			43.8	35.0	…	35.3	…	…	…	…	…	…	…

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

¹Excludes the 2015 bank bailout of CFAF 34.2 billion. A final determination by the courts on the legality of the bailout contracts remains pending.

²Contribution to the growth of broad money in percent.

View Table

Table 1.

Guinea-Bissau: Selected Economic and Financial Indicators¹

				2015	2016	2017		2018		2019	2020	2021	2022	2023
					Pre l.	EBS/17/116	Est.	EBS/17/116	Proj.	Projections
National accounts and prices
	Real GDP at market prices			6.1	6.3	5.5	5.9	5.0	5.3	5.1	5.0	5.0	5.0	5.0
	Real GDP per capita			3.8	4.0	3.2	3.6	2.7	3.0	2.9	2.7	2.7	2.7	2.8
	GDP deflator			12.1	6.1	7.2	5.9	1.6	0.1	2.2	2.4	2.5	2.8	2.8
	Consumer price index (annual average)			1.5	1.5	2.2	1.1	2.3	2.0	2.2	2.3	2.5	2.6	2.8
External sector
	Exports, f.o.b. (based on US$ values)			51.8	9.6	24.5	18.7	7.1	4.0	9.5	8.8	8.4	8.5	8.4
	Imports, f.o.b. (based on US$ values)			−3.5	11.2	30.0	23.1	13.2	15.7	8.7	8.8	8.4	8.5	8.4
	Export volume			19.1	−6.9	−8.6	−5.2	5.5	7.0	6.6	5.8	5.2	5.1	4.8
	Import volume			15.7	14.6	18.6	13.3	10.3	8.2	7.4	7.2	6.6	6.9	6.9
	Terms of trade (deterioration = -)			54.4	13.9	28.7	31.2	−0.1	−7.4	2.4	2.4	2.3	2.7	2.9
	Real effective exchange rate (depreciation = -)			−2.5	1.9	…	−0.1	…	…	…	…	…	…	…
	Exchange rate (CFAF per US$; average)			591.2	592.8	…	580.9	…	…	…	…	…	…	…
Government finances
	Domestic revenue (excluding grants)			29.4	−0.6	8.7	19.1	22.9	16.2	15.7	12.7	11.6	12.2	12.8
	Domestic revenue (excluding grants and one-offs)			30.4	5.2	10.0	20.5	22.9	13.7	18.2	12.7	11.6	12.2	12.8
	Total expenditure			11.3	0.9	−5.2	6.1	15.7	15.2	12.6	10.8	11.1	11.3	11.2
		Current expenditure		5.0	8.8	−12.2	−3.5	12.3	8.2	16.0	10.9	10.7	12.7	11.9
		Capital expenditure		25.5	−14.2	11.7	29.2	22.3	27.7	7.4	10.5	11.8	9.0	9.9
Money and credit
	Net domestic assets2			18.2	−2.5	−9.7	6.1	0.6	−0.4	2.0	1.6	1.7	1.9	1.8
		Of which:
			Credit to government	4.6	1.8	−0.5	−2.8	0.0	0.5	0.3	−0.4	−0.3	−0.4	−0.5
			Credit to the economy	13.0	2.2	−8.3	−7.7	1.5	1.6	1.7	2.0	2.0	2.2	2.3
	Velocity (GDP/broad money)			2.1	2.1	2.3	2.2	2.3	2.2	2.2	2.2	2.2	2.2	2.3
Investments and savings
	Gross investment			8.1	7.8	8.5	10.5	8.7	12.7	12.8	13.3	13.7	13.8	14.0
		Of which: government investment		8.0	6.1	6.1	7.0	7.0	8.5	8.5	8.7	9.1	9.1	9.3
	Gross domestic savings			3.4	3.0	2.9	6.2	2.5	6.2	6.9	7.6	8.4	8.8	9.3
		Of which: government savings		−0.5	−2.5	0.6	0.6	1.5	1.2	1.3	1.6	1.8	1.8	2.0
	Gross national savings			9.9	9.1	7.8	10.0	6.4	9.4	10.6	11.1	11.6	11.8	12.1
Government finances
Total revenue				13.7	12.1	11.7	12.8	13.5	14.1	15.2	15.9	16.5	17.2	17.9
	Total domestic primary expenditure			15.2	14.1	11.3	12.3	12.8	12.8	14.2	14.9	15.6	16.4	17.2
	Domestic primary balance			−1.5	−2.0	0.4	0.5	0.8	1.3	1.0	1.0	0.9	0.8	0.8
	Overall balance (commitment basis)
		Including grants		−3.0	−4.7	−1.7	−1.3	−1.9	−2.5	−2.2	−2.0	−2.1	−2.1	−1.9
		Excluding grants		−9.4	−8.6	−5.8	−6.7	−5.5	−7.3	−7.2	−7.1	−7.3	−7.4	−7.3
External current account				1.9	1.3	0.0	−0.5	−2.3	−3.2	−2.3	−2.2	−2.1	−2.0	−1.8
	Excluding official current transfers			1.0	1.2	−0.4	−0.8	−2.3	−3.2	−2.3	−2.2	−2.1	−2.0	−1.8
Stock of central government debt				51.7	53.3	49.2	50.1	48.3	50.3	48.8	47.4	46.0	44.6	43.2
	Of which: external debt			15.1	14.7	12.5	12.4	13.0	12.0	12.2	12.8	14.1	15.3	16.1
Memorandum item:
Nominal GDP at market prices (CFAF billions)				619.7	698.7	780.7	784. 0	832.7	826. 5	888. 6	955. 4	1028 .5	1110 .0	1198 .4
WAEMU gross official reserves (billions of US$)				12.4	10.4	…	13.0	…	…	…	…	…	…	…
	(percent of broad money)			43.8	35.0	…	35.3	…	…	…	…	…	…	…

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

¹Excludes the 2015 bank bailout of CFAF 34.2 billion. A final determination by the courts on the legality of the bailout contracts remains pending.

²Contribution to the growth of broad money in percent.