Guinea-Bissau is one of the poorest countries in the world, ranking 176 out of 186 countries on the United Nations Human Development Index 2012. Guinea-Bissau has a population of about 1.6 million, with an economy based primarily on farming and fishing activities, which represent about 46% of gross domestic product (GDP). Agriculture generates 80% of employment and 90% of exports (primarily through cashew nuts, the main export). The country has poor infrastructure and weak social indicators, and more than two-thirds of the population live under the poverty line.
The country has the natural resources and the geography to grow at a reasonable rate. It has an abundance of high-quality land and favorable rainfall. Its rich mineral deposits, exotic bio-diversity, and fishing and tourism potential could provide diverse sources of income.
Guinea-Bissau has experienced significant conflict both prior to and following independence. A fierce, 13-year guerilla struggle led to late independence (1974) from Portugal, with few structures for effective governance in place. The internal conflict of 1998 to 1999 and a series of military coups have undermined the development of the country’s economic and social infrastructure, and contributed to intensifying the already widespread poverty. João Bernardo Vieira seized power in 1980, ruled the country until he was ousted following the 1998-1999 conflict, and returned to power in the 2005 presidential elections. On March 1 and 2, 2009, both President Vieira and the Army Chief of Staff, General Tagme Na Waie, were brutally killed within hours of each other. Little more than a year later, after the successful electoral process of June/July 2009 had established President Malam Bacai Sanhá, concerns about the security situation were again raised. On April 1, 2010, the (then) Army Chief of Staff Admiral Zamora Induta was detained (and finally released only in December 2010), and Prime Minister Carlos Gomes Junior temporarily arrested by army mutineers led by the (then) Deputy Army Chief of Staff Antonio Injai, who later replaced Admiral Induta in top military position through a controversial appointment by President Sanhá. Following the 2010 military unrest, European concerns over the security situation in the country, lack of subordination of the military to the civilian power and drug trafficking, prompted suspension of major EU development assistance to Guinea-Bissau and a request for consultations with authorities on Article 96 of the Cotonou Agreement.
On April 12, 2012, the military arrested Prime Minister Carlos Gomes Júnior, just prior to the second round of the presidential elections. Following negotiations between ECOWAS and the military and political parties, power was handed over to civilians, and the military returned to barracks. As a result of the Transition Pact (Pacto de Transição - PT) and Political Agreement (Acordo Político – AP), Serifo Nhamadjo, successor of the deposed Interim (caretaker) President Raimundo Pereira, became Transition President, with all the competencies and powers of an elected President.
Recent Political Developments
Some progress has been observed to sort out the political gridlock triggered by the coup d’état of April 2012 but political instability is likely to persist in 2013. In November 2012, as a result of an agreement between the two main parties in the National People’s Assembly, the African Party for the Independence of Guinea-Bissau and Cape Verde (PAIGC) and the Social Renovation Party (PRS), the Parliament resumed its sessions and extended its mandate which was scheduled to expire November 28, 2012. In January 2013, PAIGC (which was in office before the coup d’état) endorsed both the Political Transition Pact and Agreement signed in May 2012 by the military, the transitional authorities, and the parties that supported the coup d’état. After serious divergences over the transitional framework, the international community has reached initial agreements on the milestones of the transition period. The Economic Community of West African States (ECOWAS), the Community of Portuguese-Speaking Countries (CPLP), the African Union (AU) and the United Nations have joined efforts in a common front to help bring the country out of the crisis. Resumption of dialogue with the transitional authorities was launched, with a growing consensus that the transitional period should finish at the end of 2013, and thus, general elections be held in 2013. In order to meet this target timeline, the international community expects a clear and consensual transition roadmap from the Transition President, ratified by the Parliament that could lead to the formation of a broad-based, inclusive government and the conduct of general elections at the end of 2013. The roadmap would build the basis for resumption of normal relations with nations and formulation of international support to the country.
Precarious functioning of government institutions, the lack of restoration of the constitutional order, drug trafficking and still weak international support for the transition remain a major source of political instability. A series of civil service strikes have prevented the provision of essential public services and are generating popular discontent. The transition authorities' capacity to rule the country continues to be limited by its lack of popular legitimacy and the strong influence of the military which opposes any effort that could constitute a threat to its interests. Furthermore, divisions within the military over the control of drug trafficking are apparent and could prompt destabilizing power struggles. In addition, the deterioration of the country’s security situation, the continuous infringement of human rights and political freedom and the strong spread of cocaine trafficking in the last months are exacerbating the country’s fragile political situation.
The Economic and Fiscal Situation
Economic activity was strongly affected by the April 2012 military coup, which paralyzed the functioning of public institutions for a two-month period and significantly affected the storage and export of cashews, the country’s main export and leading economic sector. Industrial activity and the construction sectors also experienced a strong decline. GDP fell by 1.5 percent in 2012 reflecting the stagnation of the primary sector and the decline of secondary and tertiary sectors. Unfavorable rainfall conditions, disruptions that affected the distribution of imported seeds and fertilizers and the fall in cashew export value (which represents almost 40 percent of agriculture value added) all contributed to the decline. Secondary sector output fell by 3.6 percent. Industrial activity and the construction sector suffered from the sharp fall in power generation and in public investments in infrastructure. The output of the tertiary sector fell by 2.3 percent with substantial a fall in commerce and on trade and transport services related to the cashew exports. According to the IMF, GDP growth for 2013 may reach 3.5 percent. This projection assumes good rainfall conditions, increases in cashew exports, a slight recovery in international cashew prices, and the resumption of some public investment projects. Of course, this positive scenario assumes a more stable political scenario in 2013.
Fiscal and external accounts have also worsened. The sharp fall in government revenues caused by the withdrawal of external grants and the suspension of the fishing compensation payments from the EU were reflected in the collapse of public investments and a modest increase in the fiscal deficit from 1.4 percent of GDP in 2011 to 1.8 percent of GDP in 2012. The decline of cashew exports and reduction of external transfers worsened the balance of payments that shifted from a surplus of 6 percent of GDP in 2011 to a deficit of 5 percent of GDP in 2012.
Guinea-Bissau’s economic growth prospects for the rest of 2013 heavily depend on political developments. The budget for 2013 foresees a reduction of the overall fiscal deficit and the recovery of government investment. These improvements rely on the assumption of increases in grants and the reduction of recurrent expenditures. As some development partners are resuming operations in the country, it is expected that project and budget support grants will increase. Nonetheless, this expectation is heavily dependent on the normalization of political conditions. The reduction in recurrent spending has also proved to be difficult due to the pressures for salary increases for the civil service and in particular for the military. In this context the delivery of budget support operations from Nigeria and ECOWAS are crucial to prevent the accumulation of arrears and delays in the salary payments of the civil service which could trigger strikes, suspension of basic service delivery and unrest in the military.
Last updated April 2013
Guinea-Bissau joined the World Bank in March 1977, three years after independence. The first operation was approved in 1979 for a road construction/rehabilitation project. Since then, IDA has approved 33 projects for Guinea-Bissau amounting to about US$383 million.
Guinea-Bissau was the third-smallest recipient of the International Development Association (IDA) 15 in the Africa Region, with an overall IDA-15 allocation of SDR 12 million (about US$18-19 million). The Indicative IDA-16 allocation for Guinea-Bissau for the period of July 2011 through June 2014 is SDR17.7 million (about US$26.6 million).
World Bank operations in Guinea-Bissau are based on an Interim Strategy Note (ISN) approved in June 2009. The ISN is based on two pillars; strengthening economic management and laying the foundations for improvement in the productive sectors, and increased access to basic services. Capacity development for efficient governance and project implementation is a cross-cutting topic. The ISN is intended to pave the way to a more substantial high-impact program of World Bank support which, in partnership with other donors, would address key strategic challenges with a view to helping the country escape from its current vicious circles of low macroeconomic performance, weak governance and political instability.
The ISN bridged the time until Guinea-Bissau reached the Heavily Indebted Poor Countries Initiative (HIPC) completion point, and a second Poverty Reduction Strategy Papers (PRSP) was prepared in mid-2011. In late 2011, the World Bank started the preparation of a full, four-year Country Partnership Strategy (CPS) which laid out the Bank’s contribution to a multi-donor high-impact program for transformative change in close collaboration with the international donor community. The CPS process was put on hold following the April 2012 coup that suspended Bank operations in the country.
The current lending portfolio consists of five IDA-funded projects totaling around US$42.85 million equivalent, and focusing on multi-sector infrastructure rehabilitation, emergency electricity and water rehabilitation, bio-diversity conservation, community-driven development, and regional fisheries. Trust-funded grants - drawing on European Union funds, the State and Peace-Building Fund, and the Global Environmental Facility - provide an additional US$12.45 million for emergency food security, including rice production and school feeding/food-for-work programs in collaboration with the World Food Program (WFP), as well as coastal and biodiversity management, participatory rural development, and to provide technical assistance to the emerging extractive industries sectors.
The World Bank has also supported non-lending activities in Guinea-Bissau, and in recent years it hascompleted a Public Expenditure Management and Financial Accountability Review (PEMFAR), drawing in part on an EU-funded PEFA diagnostic and covering public financial management and procurement performance, as well as a review of public expenditures in education. An Education Country Status Report (in preparation of the EFA/FTI funding proposal), an Investment Climate Assessment, a Diagnostic Trade Integration Study, Country Economic Memorandum, and a Debt Management Performance Assessment were also completed during the last three years.
The International Finance Corporation (IFC) made significant progresses prior to April, 2012, coup on three initiatives including a warehouse financing deal with a bank to facilitate export of cashews, a PPP project on EAGB jointly with the World Bank and an Investment Climate reform program also jointly with the WB. All three projects were put on hold due to the political situation.
The main development partners of Guinea-Bissau are the European Union (EU) together with European bilateral donors, Economic Community of West African States (ECOWAS) and West Africa Economic Monetary Union (WAEMU), West Africa Development Bank (BOAD) the African Development Bank (AfDB), United Nations agencies, the World Bank Group and the International Monetary Fund (IMF). Important emerging non-traditional donors are Angola, China, and Iran.
Last updated April 2013
Emergency Food Security Support Project
The Emergency Food Security Support Project (EFSSP) has been in effect in Guinea-Bissau since October 2008. At the request of the Government of Guinea Bissau, the World Bank implemented the project as a response to the 2008 international food price crisis. The objective of EFSSP is to improve food security for the most vulnerable populations, including children, and increase smallholder rice production in project areas.
The project is designed to support the most vulnerable populations through school feeding and a food-for-work program to rehabilitate land for rice production. The implementation of school feeding programs started on March 4, 2009 in most schools and the food-for-work program started on April 2, 2009. At the moment, the school feeding program is being implemented in 116 schools in five regions.
As of August 2011, the project is well on its way to achieving the project objective. The number of students receiving one meal a day on average was 14,102 and about 49% of them were girls against a target of 14,000 meals a day. The project has also generated 285,000 work days against a target of 160,000 workdays initially planned for the duration of the project. About 9,100 tons of paddy rice is estimated to have been produced on the rehabilitated rice land under the project, exceeding the project target of 7,500 tons.
The satisfactory progress towards achieving the project objective is mainly due to the successful implementation of the school feeding program, rehabilitation of land and rice production in 2009 and 2010. It is expected that the project will further contribute to rice production in 2011 since more support will be provided through micro-projects.
The support under this project has been strengthened by a second parallel operation funded by the European Union Food Crisis Rapid Response Facility Trust Fund (EUFRF). This project has similar development objectives and project components with the original project. However, there are some minor differences between the two operations, related to implementation periods, and the type of infrastructure work done through food-for-work: Instead of rehabilitation of new rice lands, the food-for-work program under EUFRF deals with the rehabilitation of rural feeder roads which is critical to enhancing welfare by improving access to the project areas.
As of August 2011, the number of students receiving one meal a day under EUFRF on average was 28,030 and about 48% of them were girls. The project generated 165,000 work days against a target of 162,000 work days planned. The direct beneficiaries under the food for work program were 7,310 participants and indirect beneficiaries were 43,860, with a total of 51,170 beneficiaries against a planned target of 18,900 beneficiaries at the end of the project. Data related to the rice produced will be available at the end of the agricultural season in January 2012.
There has also been considerable progress in the rehabilitation of feeder roads. In February 2011, only 67 km of roads were completed and by end of June 2011 a total of 205 km of roads, out of a total of 300 km, have been completed. In addition, the procurement of seeds, fertilizers and agriculture equipment and tools, planned under this project, has been completed.