Overview

Country Overview

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 fragility and poverty trap that has made it difficult to achieve and sustain development outcomes.

Political Context

 In April 2012, a coup d’état reversed the social and economic gains that Guinea-Bissau had achieved in the previous few years, and once again pulled the country into a political and economic crisis. However, general elections were held in early 2014, restoring democratic order. There is a consensus among the international community that these elections provided a strong basis for reengaging, and there is now an urgent need to build on the progress made and support the government as it works to jumpstart development efforts aimed at reducing poverty reduction and boosting shared prosperity.

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 Cabo Verde (PAIGC). PAIGC’s candidate, José Mario Vaz, was elected president and was sworn in on June 23, 2014. However since the elections, tensions between the President Jose Mario Vaz and Prime Minister Domingos Simoes Pereira gradually escalated and, on August 12, 2015 the President dismissed Prime Minister Pereira and his Government. Following two months of political deadlock, a new government was sworn in on October 13, 2015. The new team is led by Prime Minister Carlos Correia, 81, a veteran of the struggle for independence, and is made up of 15 ministers and 14 secretaries of state.

Economic Overview

At the beginning of 2015, growth in Guinea-Bissau picked up markedly, following the country’s transition back to democracy in mid-2014. While still lower than the average growth for the previous ten years, growth in 2014 was nonetheless a marked improvement over the economic outcomes of 2012-13. First, the economic recovery has been driven by better managed cashew campaigns: exports surged by 8.7% in 2015 in real terms, where raw cashew nuts account for 85% of the country’s exports. The 2015 cashew campaign, which runs from April through June, was considered a success, both in terms of volumes exported and strong prices. Since most households in Guinea-Bissau, especially the poor, rely on cashew production, the 2015 cashew campaign bodes well for poverty reduction.  Second, the restoration of basic public services and investments propelled growth, supported by the resumption of donor financing. The African Union lifted its suspension on Guinea-Bissau and donors renewed their faith in Guinea-Bissau’s fiscal management when the IMF launched a Rapid Credit Facility in November 2014, followed by an Extended Credit Facility approved by the IMF Board on July 10, 2015. However, the dismissal of the government in August and the subsequent political deadlock raised questions whether progress has been sustained.   

Early actions by the government—before it was removed in August 2015—demonstrate that progress is possible when there is political stability. Upon taking office, the government swiftly passed a retroactive budget for 2014 and prepared a 2015 budget in record time. Both were unanimously adopted by parliament. The government suspended the controversial and regressive ‘FUNPI surcharge’, an additional tax on export which the World Bank estimates to have increased poverty by 2%.

The new government also successfully strengthened domestic revenue mobilization, significantly increasing non-tax revenues (especially through fishing licenses), while also raising customs and tax revenues by 39% and 9% year-on-year respectively. In addition, structural reforms were put in place that tightened control over fuel imports, reduced tax exemptions, rehabilitated customs posts and intensified tax audits of large taxpayers.  Combined, these actions have given a much-needed boost to public revenues. The government also succeeded in clearing all external arrears and a significant portion of domestic arrears. Budget support from a number of donors resumed and the international community pledged $1.5 billion in support to Guinea-Bissau at a donor roundtable held in Brussels in March 2015. Although over 50% of these additional resources were grants, public debt to finance the government’s development plan ‘Terra Ranka’ was expected to increase. Nevertheless, given that this debt would translate into growth, overall, the risk of debt distress remains moderate under the IDA-IMF Debt Sustainability Analysis.

Development Challenges

Guinea-Bissau embodies some of the world’s toughest development challenges, combining acute and rising poverty with persistent fragility. Since its civil war in 1998/99, economic growth has barely exceeded population growth: per capita gross national income in 2013 was estimated at about $590. Official estimates for 2010 place moderate poverty ($2 PPP) close to 70%, higher than poverty in 2002, which was measured at 65E. Extreme poverty ($1 PPP) is also among the highest in the world, reaching 33% in 2010, up from 21% in 2002. Economic opportunities for poor households are limited. Three out of four households living in extreme poverty rely almost entirely on agriculture for income, consumption and barter. 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: Dec 09, 2015

World Bank Engagement in Guinea-Bissau

Guinea-Bissau joined the World Bank in March 1977, three years after independence. The first operation was approved in 1979 for a road construction and restoration project. Since then, the International Development Association (IDA) has approved 43 projects for Guinea-Bissau amounting to about $511 million.

The WBG and the rest of the international community suspended its support to Guinea-Bissau following the April 2012 coup, and resumed engagement following the April/May 2014 elections.

World Bank engagement in Guinea-Bissau for fiscal years 2015-2016 is based on a Country Engagement Note (CEN) approved in March 2015. The CEN is designed to provide immediate short-term support to the country, in order to consolidate the transition and restore basic services while assisting the government to design a more sustainable strategy for long term poverty reduction and greater shared prosperity. The CEN focuses on two key areas:

  • Building institutions and strengthening public sector capacity, to enable the Government to provide a sound macro-fiscal environment and the infrastructure and legal and regulatory framework necessary to promote shared growth and attract investment.
  • Strengthening the provision of basic services to the poor in health, education, electricity and water with a view toward providing people with the services, resources, and skills they need to create and take advantage of economic opportunities.

The current active WBG portfolio for Guinea-Bissau consists of five national IDA operations ($57.5 million), two regional IDA operations ($84 million) and two Trust Fund operations ($9.86 million) for a total commitment amount of $151.4 million of which $118 million is undisbursed. The largest share of the portfolio is in Energy (53%), followed by water (15%), social protection (13%), Trade & Competitiveness (6%), environment & fisheries (5%), Agriculture (5%) and Governance (3%). The World Bank has also supported non-lending activities in Guinea-Bissau such as a Public Expenditure Management and Financial Accountability Review (PEMFAR) and a Country Economic Memorandum (CEM).

International Finance Corporation (IFC)

Prior to the April 2012 coup, the International Finance Corporation (IFC) made significant progress in advancing the three following initiatives: a warehouse financing deal with a bank to facilitate the export of cashews, a joint World Bank PPP energy project entitled Electricidade e Águas de Guinea-Bissau (EAGB), and a joint World Bank investment climate reform program. All three projects were put on hold due to the political situation.

Last Updated: Dec 09, 2015

Emergency Food Security Support Project

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 the Emergency Food Security Support Project (EFSSP) was to improve food security for the most vulnerable populations, including children, and increase smallholder rice production in project areas.

Under this project, the number of students receiving one meal a day on average was 14,102, 49% of whom were girls. The project also generated 285,000 work days against a target of 160,000 work days 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’s target of 7,500 tons.

The support of this project was strengthened by a second parallel operation funded by the European Union Food Crisis Rapid Response Facility Trust Fund (EUFRF). The food-for-work program under EUFRF dealt with the rehabilitation of rural feeder roads, which were critical to enhancing welfare by improving access to the project’s areas. Under this trust fund (now closed), the number of students receiving one meal a day on average was 28,030, 48% of whom 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. There has also been considerable progress in the rehabilitation of feeder roads. In February 2011, only 67 km of roads were completed. By the end of June 2011, 205 km of roads out of a total of 300 km, were completed.

Support for this project continued in 2015 with a $7 million Trust Fund from the Global Food Crisis Response Program (GFCR). The operation successfully achieved its four development objectives:

  • Providing one meal a day for 17,500 students for a period of 160 days and Take Home Rations for 2,500 girl students for 160 days. World Food Program (WFP) started the provision of school feeding on February 16, 2015 and completed on June 30, 2015. In total WFP provided one meal a day to 35,115 students of which 17,052 were female in 150 schools. Take home rations have benefitted 5,299 girls who received a total of 105.8 tons of rice.
  • Generation of employment for 250,000 work days (100 days per participant for 2,500 farmer participants) and provision of food ration to 17,500 direct and indirect farmer household beneficiaries under the food-for-work program to rehabilitate land.  Under this activity, there were 4,402 participants’ which translates into 30,814 beneficiaries.
  • Rehabilitation of 5,000 ha of land of rice cultivation.   A total of 5,301 hectares were rehabilitated of which 2,532 ha were mangrove land and 2,769 ha were low land.
  • Provision of agricultural inputs to at least 4,000 smallholder farmers involved in rice cultivation. A total of 250 tons of rice seed (150 tons for mangrove and 100 tons for low land) were procured by the Project and distributed to 5,538 beneficiaries. 

Last Updated: Dec 09, 2015

Guinea-Bissau’s main development partners are the European Union (EU) together with European bilateral donors, the Economic Community of West African States (ECOWAS), the West Africa Economic Monetary Union (WAEMU), the West Africa Development Bank (BOAD), the African Development Bank (AfDB), the United Nations agencies, the World Bank Group and the IMF. Important emerging non-traditional donors are Angola, China, and Iran. 

Last Updated: Dec 09, 2015


LENDING

Guinea Bissau: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments