The International Monetary Fund (IMF) Review Mission to Guinea-Bissau has declared that the country’s economy is indeed making progress.

This declaration was contained in IMF’s 2016 Report through a press statement dated April 7, 2016.

The Mission led by Felix Fischer visited Bissau between March 28 ”“ April 7, 2016 to conduct the combined first and second reviews under the Extended Credit Facility (ECF) arrangement and other matters.

Mr. Fischer issued the following statement at the winding up of the Mission, ‘Guinea Bissau’s economy is estimated to have grown by 4.8 percent in 2015 on account of a good cashew harvest and favorable terms of trade. Enhanced supply of electricity and water contributed to higher activity in the secondary and tertiary sectors. Consumer price inflation remains low, averaging 1.5 percent at end of 2015.

‘The economic outlook remains favorable, but risks are tilted to the downside. The ongoing recovery in economic activity and exports is expected to continue in 2016, with a projected real GDP growth rate of 4.8 percent. Inflation is expected to average 2.6 percent in 2016 and increase to 3.0 percent in 2017, consistent with rising economic activity supported by enhanced energy and water supply. Downside risks include lack of progress in structural reforms, including in the banking sector, and a related weakening of development partner support, as well as spending pressure in the aftermath of the political crises. On the upside, cashew nut export volumes and prices are expected to remain high, bolstering tax receipts and external balances.

‘Discussions focused on the key objectives of the government’s economic program, which aims to consolidate the fiscal position through better expenditure management and enhanced revenue mobilization, deepen institutional reforms, mitigate vulnerabilities, and develop the private sector to support growth and job creation. The program focuses on strengthening budgetary transparency as well as public investment and debt management, improving the compilation of statistics, and addressing governance and security reform issues.

‘The government budget was under pressure in 2015, reflecting a shortfall in donor receipts and higher-than budgeted spending. Although revenue collection exceeded expectations, on account of vigilant tax administration and good cashew nut exports, non-wage current expenditures increased steeply during the year, driven by increasing use of non-regularized expenditures. Once the current political impasse is settled, it will be crucial for Parliament to approve a 2016 budget aligned with necessary medium-term fiscal consolidation.

‘Preliminary information points to mixed progress in implementing structural measures. While the authorities implemented all expenditure measures, the elaboration of a strategic plan for improving working conditions of the tax authority and the implementation of a new small taxpayer regime are not yet completed. A key measure focused on improving the business environment for private sector growth ”“ the audit of the Fund for the Industrialization of Cashew (FUNPI) ”“ also still needs to be completed.

‘Discussions for the completion of the combined first and second reviews are at an advanced stage. Discussions with the authorities will continue during the IMF Spring Meetings in Washington as they finalize their reform priorities and proceed with pending key actions to keep the program on track, notably on strengthening the banking sector.’