The government of Guinea Bissau and the International Monetary Fund (IMF) have reached a staff-level agreement for the implementation of a special reform program.

In a May 12 statement, the IMF reported that the deal is prior to the conclusion of a 9-month staff-monitored program designed to “gradually narrow large macroeconomic imbalances that have been intensified by the impact of the COVID-19 pandemic, strengthening governance and social safety nets, and making progress towards more inclusive growth.”

Guinea Bissau has been facing growing socio-economic challenges since the pandemic started, which led to a contraction by 1.5% in the economy thus widening the public deficit. Despite a timid rebound at 3.5% this year, the weight of the pandemic continues to be present.

To foster a better economic recovery while giving the government more room to maneuver, the authorities plan to reduce the public debt burden through the G20 debt service suspension initiative (DSSI). Despite difficulties in accessing resources, the government is also considering strengthening social safety nets, and hopes the IMF program will help restore the macroeconomic balance needed to do so.

“The program includes revenue mobilization and expenditure containment measures, including the wage bill (projected to be about 65 percent of tax revenue in 2021), to generate fiscal space for priority spending while ensuring debt sustainability,” said Jose Gijon who led the IMF mission to the country.

“The SMP will assist the authorities in the improvement of the fiscal framework, through the development of a realistic public financial management strategy to enhance fiscal governance, transparency and accountability, including measures to strengthen expenditure control, tax and custom frameworks. It will also support the fight against corruption and mitigation of state-owned enterprises’ risks, all supported by IMF technical assistance,” he added.

The staff-level agreement needs validation from the IMF Board before being implemented. If approved, the deal can be followed by an economic reform program supported by Fund financing.

Moutiou Adjibi Nourou