IMF says Guinea-Bissau faces broadly positive outlook

Bissau, Guinea-Bissau (PANA) – Guinea-Bissau currently appears in a broadly positive outlook, with the recent consensus-based agreement on a new government offering the prospect of greater political stability, according to a senior official of the International Monetary Fund (IMF).

However, this West African country faces new challenges as the terms of trade gains that supported economic expansion for the past three years have partially reversed, said IMF Deputy Managing Director Tao Zhang.

Following completion on Friday of the fifth review of Guinea-Bissau’s performance under an economic programme supported by the Fund’s Extended Credit Facility (ECF), Mr. Zhang noted that maintaining a strong reform drive will be crucial for continued improvements in outcomes.

“A further strengthening of tax and customs administration is essential for the domestic revenue mobilization needed to undertake priority infrastructure and social spending. Moreover, planning and execution frameworks will need to be enhanced for scaled-up spending to have the desired results.

“Continued progress toward improving conditions for private enterprise will also be important. Boosting private investment depends on effectively reducing regulatory uncertainty, combating corruption and rent seeking, and enhancing transparency in public administration.

“Overcoming the longstanding problems in electricity provision is also essential and requires fundamental reform of the public power utility,” Mr. Zhang suggested.

Guinea-Bissau’s economic activity has remained robust, according to the IMF, with real GDP growth estimated at 5.9 percent in 2017. Against this backdrop, the IMF Executive Board has approved the authorities’ request for a one-year extension of the ECF arrangement to July 2019.

The extension and augmentation will help anchor macroeconomic stability during the upcoming election period, support reforms, and help meet balance of payments needs.

Completion of the performance review under the ECF arrangement enables the release of about US$4.3 million, bringing total disbursements to Guinea-Bissau under the arrangement to US$24.2 million.

The IMF Board assessed the country’s outlook as broadly positive, with growth projected at 5.3 percent in 2018, but subject to significant risks stemming from the still fragile political environment and adverse terms of trade developments.

“Strengthening the banking system will be critical for maintaining financial sector stability and expanding financial intermediation. Decisive action toward any bank that remains undercapitalized by the end-June deadline extended by the Banking Commission will be important, and any intervention should minimize the costs to the state and adhere to best international practices, including avoidance of market distortions and conflicts of interest,” said Mr. Zhang.

“The one-year extension and augmentation of the ECF arrangement will help anchor macroeconomic stability during the upcoming election period, support reforms focused on mobilizing revenue and addressing gaps in essential infrastructure, and help meet balance of payments needs.”
-0- PANA AR 2June2018

02 june 2018 08:19:59

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