IMF Staff Concludes Mission to Guinea-Bissau
● A weak cashew campaign this year has dampened economic activity; real GDP growth is projected to fall to 3.8 percent in 2018.
● Discussions focused on boosting government revenue and strengthening the banking sector.
● Discussions for the completion of the sixth ECF review will continue over the coming months.
An International Monetary Fund (IMF) mission led by Tobias Rasmussen visited Bissau during September 19–October 2, 2018 for the sixth review under the Extended Credit Facility (ECF) arrangement.
At the end of the visit, Mr. Rasmussen issued the following statement:
“Discussions focused on measures to enhance government revenue mobilization and on a strategy to strengthen the banking sector. While important gains have been made over the past few years, revenue mobilization has weakened this year and high levels of non-performing loans have continued to weigh on banks. Addressing these two pressure points will be key to securing the ECF-supported program’s objectives of enhanced public service delivery and macroeconomic stability to foster inclusive growth.
“A weak cashew harvest this year has dampened economic activity, with lower cashew production and prices weighing heavily on overall output, exports, and consumption. The mission projects real GDP growth of 3.8 percent in 2018, down from the roughly 6 percent pace maintained during 2015–17. Driven by lower cashew exports, the external current account deficit is projected to widen to 3.6 percent of GDP in 2018 from an estimated 1.9 percent in 2017.
“Government revenue has suffered from weaker economic growth along with slow progress on reform measures underpinning the 2018 budget. Tax collections for the first half of the year fell 9.7 percent below the program target. Cashew-related receipts have declined and there have also been delays in, among others, collection of tax arrears and stamp duty on air transportation. The underperformance of tax revenue was, however, partially offset by higher non-tax revenue, including receipts from sales of seized timber.
“The authorities are committed to implement a series of measures to strengthen revenue mobilization. These measures would raise approximately 0.6 percent of GDP and should help keep this year’s government deficit to 4 percent of GDP (commitment basis). They would be complemented by steps, through the Treasury Committee, to strengthen public financial management and align expenditures with available resources.
“On banking and financial sector policies, the national and regional authorities are committed to ensuring that all banks meet prudential standards, notably regarding adequate capitalization and loan classification. Among others, the authorities are encouraging banks with high levels of non-performing loans to engage more actively in debt restructuring that is affordable to borrowers and to assess the scope for accelerated collection of collateral.
“Discussions for the completion of the sixth ECF review will continue over the coming months as the authorities proceed with actions to strengthen government finances, prepare a draft budget for 2019, and address fragilities in the banking sector.
The mission met with President José Mário Vaz, President of the National Assembly Cipriano Cassamá, Prime Minister and Minister of Finance Aristides Gomes, and Central Bank of West African States (BCEAO) National Director Helena Nosolini Embaló, and other high-level officials, as well as representatives of the private sector, civil society, and the donor community.”
Source: International Monetary Fund
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