Guinea-Bissau: Second Review Under the Extended Credit Facility Arrangement and Requests for a Waiver of Nonobservance of Performance Criteria, Rephasing of Access, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for Guinea-Bissau

© 2023 International Monetary Fund IMF Country Report No. 23/328 GUINEA-BISSAU SECOND REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT AND REQUESTS FOR A WAIVER OF NONOBSERVANCE OF PERFORMANCE CRITERIA, REPHASING OF ACCESS, AND FINANCING ASSURANCES REVIEW—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR GUINEA-BISSAU In the context of the Second Review Under the Extended Credit Facility Arrangement And Requests For A Waiver Of Nonobservance Of Performance Criteria, Rephasing Of Access, And Financing Assurances Review, the following documents have been released and are included in this package: • A Press Release. • The Staff Report prepared by a staff team of the IMF following discussions that ended on May 30, 2023, with the officials of Guinea-Bissau on economic developments and policies underpinning the IMF arrangement under the Extended Credit Facility. Based on information available at the time of these discussions, the Staff Report was completed on July 6, 2023. • A Staff Supplement updating information on recent developments. • A Statement by the Executive Director for Guinea-Bissau The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents. Copies of this report are available to the public from International Monetary Fund • Publication Services PO Box 92780 • Washington, D.C. 20090 Telephone: (202) 623-7430 • Fax: (202) 623-7201 E-mail: publications@imf.org Web: http://www.imf.org Price: $18.00 per printed copy International Monetary Fund Washington, D.C. August 2023 September 2023 PR23/299 IMF Executive Board Completes the Second Review under the Extended Credit Facility Arrangement for Guinea-Bissau and Approves US$3.15 Million Disbursement • The IMF Executive Board decision allows for an immediate disbursement of SDR2.37 million (about US$3.15 million) to Guinea-Bissau to help addressing financing needs and coping with a deteriorating external environment. • The economy has grown by 4.2 percent in 2022 and should recover moderately to 4.5 percent in 2023 while inflation is expected to remain high. • The authorities are taking measures to address the exogenous shocks and remain committed to strong policies and reforms. Washington, DC – August 30, 2023: The Executive Board of the International Monetary Fund (IMF) completed today the second review under Guinea-Bissau’s Extended Credit Facility ( ECF) arrangement. The completion of the review enables the disbursement of SDR2.37 million (about US$3.15 million) to help meet the country’s balance-of-payments and fiscal financing needs amid challenges related to Russia’s war in Ukraine, the substantial increase in the cost-of-living which is especially impacting the most vulnerable population, and the lingering impacts of the pandemic. This brings total disbursements under the ECF arrangement to SDR7.11 million (about US$9.46 million). In completing the second review, the Executive Board also approved the authorities’ request for a waiver for nonobservance of performance criteria on the floor on tax revenue, the ceiling on wages and the floor on the domestic primary fiscal balance. Furthermore, the Executive Board completed the financing assurances review and agreed on the rephasing of access to make two disbursements of SDR2.37 million on January 17 and April 17, 2024, instead of one single disbursement on April 17, 2024. The economy has grown by 4.2 percent in 2022 and should recover only moderately to 4.5 percent in 2023. Growth has been negatively affected by low cashew exports and adverse external shocks which are weighing on Guinea-Bissau’s socio-economic environment. The surge in food and oil prices adds pressures on annual inflation which is expected to remain high at 7.0 percent. Budget execution is facing pressures. The overall fiscal deficit remained at 5.9 percent of GDP in 2022. Based on provisional data, the public debt increased to 80.3 percent of GDP in 2022, because of higher-than-projected overall fiscal deficit, new government guarantees mainly to the public utility company and the recognition of cross-arrears owed to suppliers with non-performing loans at the undercapitalized bank. R evenue mobilization and expenditure containment remain pivotal to prevent risks to debt sustainability and access to external financing. In discussions with the mission team, the new government resulting from the winning coalition of the June 4, 2023, legislative election expressed its commitment to implementing the program reform agenda. At the conclusion of the Executive Board’s discussion, Mr. Okamura, Deputy Managing Director and Acting Chair, made the following statement: “Guinea-Bissau has demonstrated commitment to program implementation under the Extended Credit Facility (ECF) arrangement. The reform agenda includes an ambitious fiscal consolidation to support inclusive