IMF approves $20.4mn emergency assistance for Guinea-Bissau

The International Monetary Fund (IMF) has approved approximately $20.4 million for Guinea-Bissau under the Rapid Credit Facility to help the country meet its urgent balance of payments and fiscal needs caused by the COVID-19 pandemic. The impact of the pandemic on Guinea-Bissau has been severe, exacerbated by severe floods in September 2020 that destroyed essential infrastructure and key crops like rice, a staple for the country. The economic fallout led to a negative growth rate of 2.5% in 2020, a stark contrast from the 4.5% growth recorded in 2019. The collapse of international cashew prices, a major export for the country, coupled with reduced foreign direct investments, contributed to the economic challenges. Border closures, travel restrictions, and lockdown measures further hampered employment, consumption, and investment, leading to significant balance of payments and fiscal gaps. Despite increased external grants, revenue collection plummeted in 2020, underscoring the country's pressing financial needs. The IMF's financial assistance is crucial in addressing these challenges and supporting Guinea-Bissau's economic recovery. The funds will be channeled towards priority expenditure areas, including the health sector, assistance to vulnerable households, economic recovery initiatives, and infrastructure projects such as roads, telecommunications, and energy sectors. The IMF's intervention is expected to catalyze additional support from the international community in the form of grants, concessional financing, and debt relief, fostering long-term financial stability. Additionally, the IMF is actively engaged in addressing Guinea-Bissau's debt vulnerabilities. The country's debt sustainability relies on strong policy commitments, multilateral donor support, and an imminent IMF program, which will build a favorable policy track record. Guinea-Bissau's participation in the G20's Debt Service Suspension Initiative (DSSI) is set to reduce debt vulnerabilities, enhance sustainability prospects, and facilitate additional debt reprofiling from both regional and non-G20 creditors. The requirements of the DSSI, including transparent use of financial resources for COVID-19 mitigation and compliance with international debt policies, are expected to instill confidence among stakeholders and attract further assistance for Guinea-Bissau. Furthermore, the IMF is actively promoting governance and anti-corruption measures in the country to ensure transparency and accountability in fund utilization. A June 2020 report on governance and anti-corruption frameworks for Guinea-Bissau, published by the IMF, underscores the organization's commitment to combatting corruption and promoting good governance. Transparency measures, such as the establishment of a Treasury Committee to approve expenditures and the management of COVID-related spending through a dedicated account for traceability and accountability, are key steps in ensuring sound financial management. Regular reports on expenditure and independent audits further enhance transparency in fund utilization. The IMF's involvement in Guinea-Bissau's economic recovery efforts underscores the importance of good governance, fiscal transparency, and sustainable financial practices in navigating crisis situations. As Guinea-Bissau continues to grapple with the effects of the pandemic and works towards economic stability, international support and coordinated initiatives are crucial in ensuring the country's long-term resilience and development.