Washington, DC: On July 19, 2021 the Managing Director of the International Monetary Fund (IMF) approved a Staff-Monitored Program (SMP) for Guinea Bissau for the period July 2021 to April 2022. [1]
With the move to reengage with the IMF, Guinea-Bissau now has a window of opportunity for fundamental reforms to address major macro imbalances and lay the groundwork for inclusive growth. The authorities have laid out a home-grown program of reforms aimed at stabilizing the economy, removing distortions, improving competitiveness, and strengthening governance. The authorities have requested for an SMP to build a sound track record for an Extended Credit Facility in early 2022.
Guinea-Bissau has been significantly affected by the COVID-19 pandemic, which has disrupted economic activity and led to a deterioration in the external and fiscal position. The effects of these shocks have been persisting in 2021.
The authorities’ immediate priority has been to limit the impact of the pandemic and preserve macroeconomic and financial stability. Health spending was increased and measures to protect the most vulnerable and support the agricultural sector are being implemented, requiring financial support from the international community, including a Rapid Credit Facility approved by the IMF Board on January 25, 2021 ( see Press Release No: 21/21 )
Given Guinea-Bissau’s limited fiscal space and debt vulnerabilities, the emergency assistance required to face the pandemic has been mostly in the form of grants and highly concessional loans. Starting in 2021, the authorities have put in place an ambitious fiscal consolidation program to ensure debt sustainability while addressing Guinea-Bissau’s vast developmental needs. Participation of Guinea-Bissau in the debt service relief approved under the Catastrophe Containment and Relief Trust and the G20 Debt Service Suspension Initiative would provide additional resources to fight the pandemic and enhance debt sustainability prospects.
The authorities are also committed to pursuing their reform agenda and their engagement with the Fund through the SMP. They also remain committed to reinforcing fiscal governance and transparency to ensure that the emergency budgetary allocations provided by the RCF are spent appropriately. It is in this context that all COVID-19 related spending is being managed using a dedicated account at the BCEAO, and the authorities will publish bi-monthly reports on these expenditures, information on public procurement contracts, and undertake an ex-post independent audit of crisis-mitigation spending.
Table 1. Guinea-Bissau: Selected Economic and Financial Indicators, 2019-25 | ||||||||
2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | |
Prel. | Proj. | |||||||
(Annual percent change, unless otherwise indicated) | ||||||||
National accounts and prices | ||||||||
Real GDP at market prices | 4.5 | -1.4 | 3.3 | 4.0 | 5.0 | 5.0 | 5.0 | 5.0 |
Real GDP per capita | 2.3 | -3.5 | 1.1 | 1.7 | 2.8 | 2.8 | 2.9 | 2.9 |
GDP deflator | -3.5 | -0.9 | 2.7 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 |
Consumer price index (annual average) | 0.3 | 1.5 | 1.9 | 2.0 | 2.0 | 2.0 | 2.0 | 2.0 |
External sector | ||||||||
Exports, f.o.b. (CFA francs) | -22.7 | -21.1 | 9.4 | 6.9 | 6.7 | 6.2 | 5.5 | 4.7 |
Imports, f.o.b. (CFA francs) | 20.5 | -8.3 | 5.5 | -3.5 | 4.3 | 4.9 | 4.9 | 5.6 |
Terms of trade (deterioration = -) | -31.4 | -3.7 | -8.2 | 4.2 | 5.5 | 3.8 | 2.5 | 2.4 |
Real effective exchange rate (depreciation = -) | -2.8 | 2.3 | … | … | … | … | … | … |
Exchange rate (CFAF per US$; average) | 585.9 | 574.8 | … | … | … | … | … | … |
Government finances | ||||||||
Revenue excluding grants | 9.2 | -5.5 | 15.2 | 11.6 | 10.2 | 9.1 | 9.1 | 7.5 |
Expenditure | -3.0 | 30.5 | -3.2 | 5.3 | 7.4 | 3.7 | 5.5 | 7.7 |
Current expenditure | 18.2 | 10.1 | -2.1 | 5.3 | 5.4 | 5.6 | 7.7 | 6.6 |
Capital expenditure | -38.5 | 96.7 | -5.2 | 5.3 | 11.1 | 0.4 | 1.6 | 10.0 |
Money and credit | ||||||||
Domestic credit | 13.8 | -1.7 | 9.1 | 13.5 | 14.2 | 12.5 | 10.3 | 8.1 |
Credit to the government (net) | 13.8 | -19.7 | -2.8 | -3.5 | -6.4 | -7.5 | -6.7 | -6.0 |
Credit to the economy | 13.8 | 5.9 | 12.9 | 18.2 | 18.9 | 16.0 | 12.7 | 9.7 |
Net domestic assets | 11.9 | -13.8 | 7.6 | 20.9 | 20.6 | 17.1 | 13.6 | 10.3 |
Broad money (M2) | 0.3 | 9.1 | 0.9 | 6.4 | 7.4 | 6.5 | 5.6 | 5.2 |
(Percent of GDP, unless otherwise indicated) | ||||||||
Investments and savings | ||||||||
Gross investment | 14.2 | 22.4 | 21.1 | 21.1 | 21.8 | 21.1 | 20.6 | 21.2 |
Of which: government investment | 8.4 | 16.9 | 15.1 | 14.9 | 15.3 | 14.3 | 13.4 | 13.7 |
Gross domestic savings | 0.9 | 5.9 | 5.9 | 8.7 | 10.2 | 10.1 | 10.0 | 10.9 |
Of which: government savings | 1.8 | 3.4 | 5.2 | 5.9 | 6.6 | 6.2 | 6.0 | 6.2 |
Gross national savings | 5.4 | 14.1 | 12.5 | 15.6 | 17.0 | 16.3 | 16.1 | 16.8 |
Government finances | ||||||||
Revenue excluding grants | 12.5 | 12.1 | 13.1 | 13.7 | 14.0 | 14.2 | 14.3 | 14.2 |
Domestic primary expenditure | 13.9 | 16.2 | 14.9 | 14.9 | 14.7 | 14.0 | 13.7 | 13.7 |
Domestic primary balance | -1.4 | -4.1 | -1.8 | -1.2 | -0.7 | 0.1 | 0.6 | 0.5 |
Overall balance (commitment basis) | ||||||||
Including grants | -3.9 | -9.5 | -5.0 | -4.6 | -4.2 | -3.6 | -3.0 | -3.0 |
Excluding grants | -6.8 | -13.7 | -10.4 | -9.5 | -9.1 | -8.1 | -7.4 | -7.4 |
External current account | -8.8 | -8.3 | -8.5 | -5.5 | -4.8 | -4.8 | -4.5 | -4.4 |
Excluding official current transfers | -10.0 | -9.7 | -11.4 | -8.6 | -7.9 | -7.5 | -7.1 | -7.0 |
Stock of public and publicly guaranteed debt 1 | 65.9 | 79.3 | 78.4 | 77.5 | 75.7 | 73.6 | 71.1 | 68.8 |
Of which: external debt | 24.2 | 25.4 | 26.7 | 24.9 | 23.1 | 21.7 | 20.4 | 19.4 |
Memorandum items: | ||||||||
Nominal GDP at market prices (CFAF billions) | 843.5 | 824.1 | 874.2 | 934.7 | 1008.9 | 1089.0 | 1175.4 | 1268.8 |
WAEMU gross official reserves (billions of US$) | 17.6 | 21.8 | … | … | … | … | … | … |
(percent of broad money) | 34.2 | 32.9 | … | … | … | … | … | … |
Sources: Guinea-Bissau authorities; and IMF staff estimates and projections. | ||||||||
1 Coverage expanded to include legacy arrears. | ||||||||
[1] An SMP is an informal agreement between country authorities and Fund staff to monitor the implementation of the authorities’ economic program. SMPs do not entail financial assistance or endorsement by the IMF Executive Board.