20220626-IMF-Guinea-Bissau_2022_Article_IV_Consultation_and_Third_Review_under_the_Staff-Monitored_Program_Press_Release_and_Statement_by_the_Executive_Director_for_Guinea-Bissau_135页_2mb

Summary of IMF Country Report No. 22/196: Guinea-Bissau

Core Content

The IMF Country Report No. 22/196 provides a detailed assessment of Guinea-Bissau's 2022 Article IV Consultation and the Third Review Under the Staff-Monitored Program (SMP). It outlines the country's economic performance, policy challenges, and the IMF's recommendations for sustainable development and macroeconomic stability.

Main Economic Developments

• Economic Recovery: Guinea-Bissau's economy has shown a strong recovery from the Covid-19 pandemic, with GDP growth projected at 3.8% in 2022. This growth is supported by the continued strong performance of the cashew sector and political stability.
• Inflation Trends: Inflation increased to 3.3% in 2021, driven by import price pressures (especially food and fuel) due to supply chain disruptions and rising maritime costs. In 2022, inflation is expected to rise further to 5.5%.
• Fiscal Performance: The 2022 budget and tax reforms support fiscal consolidation. The SMP was successfully completed, and the RCF and SDR allocation helped address pandemic-related challenges and improve spending transparency.
• Debt Sustainability: The country's debt sustainability is under pressure due to limited fiscal space, large development needs, and external debt vulnerabilities. The IMF Executive Board commended the fiscal consolidation efforts and reforms aimed at improving governance and reducing corruption.
• Program Completion: The IMF Management approved the completion of the third review of the SMP, reflecting positive program performance despite challenges from the pandemic and Ukraine war.

Key Policy Challenges

• Governance Reforms: Sustained economic growth requires improving governance and reducing corruption.
• Revenue Mobilization: Low revenue mobilization and high non-performing loans constrain public investment and social spending.
• Economic Diversification: The economy remains over-reliant on the cashew sector, necessitating diversification to create job opportunities and reduce vulnerability to commodity price shocks.
• Fiscal Risks: State-owned enterprises pose fiscal risks, and irregular hiring in the public sector continues to be a concern.
• Social Spending: The government needs to increase social spending in education, health, and infrastructure to address human capital needs and promote inclusive growth.

IMF Recommendations

• Sustain Fiscal Consolidation: Continue fiscal consolidation in line with the 2022 budget objectives to secure debt sustainability.
• Accelerate Reforms: Speed up governance and anti-corruption reforms, including the implementation of a Treasury Single Account and strengthening the audit court, financial intelligence unit, and public procurement authority.
• Enhance Financial Intermediation: Address non-performing loans and undercapitalized banks to boost financial intermediation.
• Improve Data and Transparency: Implement new asset declaration regimes, enhance statistical data collection, and publish audits of pandemic-related spending and public procurement contracts.
• Strengthen AML/CFT Framework: Improve the anti-money laundering and counter-terrorist financing framework and data provision.
• Support Donor Engagement: Leverage donor support to accelerate vaccination campaigns and address fiscal and structural challenges.

Outlook and Risks

• Economic Outlook: The overall macroeconomic outlook is turning somewhat positive, but risks remain tilted to the downside, including prolonged pandemic, high energy and food prices, and political instability.
• External Pressures: The Ukraine war has increased food and fuel prices, worsening inflation and current account deficits.
• Donor Support: The IMF Executive Board welcomed the request for an Extended Credit Facility (ECF) to support the reform program and catalyze donor assistance.
• Next Consultation: The next Article IV consultation is expected to be held on a 12-month cycle.

Key Indicators (Selected)

Conclusion

The IMF Executive Board acknowledged the positive program performance and successful vaccination campaign of Guinea-Bissau, despite challenging conditions. They emphasized the importance of continuing fiscal consolidation and accelerating reforms to ensure debt sustainability and promote inclusive growth. The next Article IV consultation is planned on a standard 12-month cycle.

Additional Notes

• The IMF's transparency policy allows for the deletion of market-sensitive information.
• The report includes press releases, staff reports, executive summaries, boxes, figures, and tables to provide a comprehensive overview of the country's economic situation and policy framework.