Guinea Bissau: Economy and institutions “extremely fragile” and dependent on aid, IMF says

12 November 2007

Washington, United States, 12 Nov – The economy and government institutions in of Guinea Bissau remain “extremely fragile,” it revenues insufficient and the government dependent on outside aid to meet its financial commitments, the International Monetary Fund (IMF) said Friday.
In a report published while an IMF mission is visiting Guinea Bissau, the executive board of the IMF advised the Guinean authorities to subscribe to Emergency post-Conflict Assistance, “to be implemented in a context of a string and credible commitment to fiscal discipline and restoring macro-economic stability.”

“Guinea Bissau will continue to be dependent on aid from donors in the medium term to reduce its domestic debts and meet its social and economic targets,” aid which, “will depend on a commitment form the authorities to improve governance, strengthen institutional capacity and apply key structural reforms.”

The Fund said that new financial aid for the country needs to be under” highly concessionary terms, preferably donations,’ so that it does not overburden the country with debt, which even if it were to benefit in future from the IMF program to support highly indebted poor countries (HIPC), the situation will remain difficult.

The IMF has valued Guinea’s foreign debt at 402.9 percent of GDP, which is below the 487.7 percent recorded in 2004.

The country’s balance of trade deficit has increased, from minus 7.7 percent less in 2005 to an expected minus 17.4 percent this year.

The economy is expected to rise by 3.7 percent this year, the highest level of the last few years, but per capita GDP is projected to fall for the second year running, meaning that population growth is exceeding economic growth.

Inflation is expected to increase to 3 percent, maintaining the six-year trend of rising at a greater rate than per capita GDP.

The board of the IMF praised the “progress” made in “overcoming a long period of political instability” and the emergency fiscal program launched by the government.

The fiscal program “is a promising start to restore fiscal credibility and transparency and support the necessary improvement in fiscal performance,” and should be quickly applied, “especially the introduction of measures to prevent extra-budgetary expenditure,” the IMF recommended. (macauhub)