Guinea-Bissau is one of the world’s poorest and most fragile countries. Following its independence from Portugal in 1974, Guinea-Bissau has suffered from frequent political upheaval and repeated economic shocks, leading it into a low-equilibrium fragility trap that has made it difficult to achieve and sustain development outcomes.
A fierce 13-year guerilla struggle led to late independence and left few structures in place to conduct effective governance. Internal conflict in the 1990s along with a series of military coups have only served to undermine the development of the country’s economic and social infrastructures, and contributed to intensifying the already widespread poverty. In April 2012, a military coup d’état reversed the social and economic gains that Guinea-Bissau had previously achieved, and once again pulled the country into a political and economic crisis. General elections were held in early 2014, restoring democratic order. There is a consensus among the international community on the success of the transition, and the urgent need to build on the progress, support the newly elected Government, and restart the broader efforts of developing the country.
Recent Political Developments
With high rates of voter registration and participation, the elections of April/May 2014 concluded with a win for the African Party for the Independence of Guinea and Cape Verde (PAIGC). PAIGC’s candidate, José Mario Vaz, was elected president and was sworn in on June 23, 2014 in the presence of nine West African heads of state and representatives from international organizations and foreign countries including the United States. The swearing-in of the newly elected National Assembly took place on June 17, and the new government was appointed on July 4, led by Prime Minister Domingos Simoes Pereira. While the new government is dominated by members of the PAIGC, it is also includes five ministers (approximately 30%) from opposition political parties and five women (also 30%). Ministers from the opposition oversee the energy, industry, justice, trade, culture (conducting business reforms), social communication, labor and administrative reform portfolios. The five female ministers occupy the following key ministries: defense (with an envisioned reform and modernization of the army), justice, education, health, as well as women, family and social cohesion. The long standing army chief, General Antonio Indjai was dismissed by the president on September 16, 2014. The new army chief, General Biaguê On Ntam, was sworn in on September 19, 2014.
The successful elections of April/May 2014 are paving the way for an economic recovery. GDP is expected to grow by 2.6% in 2014 and 4% in 2015. Growth had been suppressed since the military coup of April 2012, as donor support was suspended and political uncertainty and policy mistakes of the transitional government derailed the cashew campaigns of 2012 and 2013. The government was almost forced to suspend its public investment program as it is mostly financed by donors. In spite of also slashing current expenditures, the government accumulated considerable wage arrears, reaching about 5 months (3% of GDP) by June 2014, notwithstanding World Bank wage payments to health and education workers. Restricted access to concessional financing resulted in borrowing at commercial rates, weakening debt sustainability.
A recovering economy, supporting domestic revenue, as well as the resumption of donor budget support, are expected to strengthen fiscal sustainability. Most salary arrears had been paid by October 2014, and the authorities planned to clear outstanding arrears to suppliers for 2012 and 2013 by the end of the year. The 2014 cashew marketing campaign went relatively smoothly and world prices are up. As a result, farm gate prices have improved which should improve domestic demand and moderate rural poverty. The new government has obtained approval from the National Assembly for a 2014 budget as well as its 4-year program, and will submit a 2015 budget before the end of the year. A donor conference is planned for early 2015.
Guinea-Bissau embodies some of the world’s toughest development challenges, combining acute and rising poverty with persistent fragility. 70% of its 1.6 million population live below the national poverty line and 33% in extreme poverty. Since its civil war in 1998, economic growth has barely exceeded population growth: per capita gross national income in 2013 was estimated at about $520. Chronic poverty is deep, entrenched and has in fact been increasing: the poverty rate has risen by 10% since 2002, and extreme poverty has grown by 23% since 2002. Most Millennium Development Goals (MDGs) are out of reach for Guinea-Bissau. There are serious infrastructure gaps, particularly in regards to the harbor, electricity, and water supply. The economy is heavily dependent on one cash crop – cashews – while rice and fuel are major imports, leaving the country vulnerable to fluctuating world prices in all three commodities.
Last Updated: Oct 09, 2014