Politics | Economy - Development
No quick cure in sight for Guinea-Bissau economy
afrol News, 10 December - A new review of the economy in Guinea-Bissau reveals three, maybe four, successive years of decreasing GDP per capita. The country's per capita income is now at US$ 185 annually. While the Bissau government is working at building international confidence, the eroded public administration and private sector will not be on their feet for years to come.
The International Monetary Fund (IMF) today published its latest review of the economic policies and performance in Guinea-Bissau, conducted together with Bissau authorities. The report reads like a continued crisis since the end-1990s and the numbers made public are more negative than previously expected.
Guinea-Bissau, quite surprisingly, enjoyed its last years of substantial economic growth in 1999 and 2000 - both with a real GDP growth of 7.5 percent - just after the 1998-99 armed conflict in the country and under the management of the armed forces. During the civilian and democratically elected government of President Kumba Yala (2000-03), the country fell into a deep economic crisis.
In 2001, the first entire year of civilian rule, Guinea-Bissau's economy grew by 0.2 percent, significantly less than the estimated population growth of 2.1 percent annually. In 2002, real GDP even decreased by 7.2 percent, and last year, growth was at a mere 0.6 percent, according to the numbers presented by the IMF. Each Bissau-Guinean thus has less means and poverty has spread.
During the Yala regime, international capital also lost all confidence in Guinea-Bissau. The country was given emergency post-conflict assistance by the IMF in 1999-2000, which was followed by a IMF-funded poverty reduction programme and a close run to achieve large-scale debt cancellation.
However, the IMF-supported programmes "went off-track in early 2001 and expired at end-2003 without the IMF concluding a review, and interim debt relief of the Fund stopped after 2001," the IMF report sums up. With the IMF giving up on the Yala administration, foreign donors decided to suspend budgetary support and stopped the debt cancellation process.
At the same time, structural reforms stalled and "the private sector remained incapacitated because of the destruction of equipment and infrastructure caused by the conflict, and the loss of stocks due to confiscating and looting," according to the IMF. This further contributed to the negative growth in the Yala era, which ended in a military coup in late 2003.
As for this year, although only a few weeks remain of 2004, the IMF has not taken the risk to make the estimation it usually presents. The situation in Guinea-Bissau remains too complex and the government is not in possession of sufficient reliable data to make estimates. The general description however indicates that 2004 may be the forth year in a row were GDP growth is less than population growth.
Guinea-Bissau is now one of the most heavily indebted countries in the world, only managing to repay its debts to the IMF. Other creditors only receive irregular payments. The conflict and crisis has left the country with just one bank, operating out of its only office in Bissau.
- Guinea-Bissau faces enormous challenges in embarking on a path of sustained growth and poverty reduction in the face of deep-seated economic and social problems, the IMF report observed. The Fund noted that "continued political instability, as evidenced by the recent military rebellion," had contributed to "depressed economic activity, widespread poverty and deteriorating social indicators and increased macroeconomic imbalances."
The key challenges for the Bissau authorities were now to "restore fiscal discipline, rebuild public administration, and improve the climate for private investment and economic diversification." Meeting these challenges would require "a combination of peace, firm commitment to sound policies by the authorities, improved governance and transparency, and the technical and financial support of the international community," the IMF held.
There was therefore no quick cure for the grave economic problems in Guinea-Bissau, recognised to be connected to political instability and unwillingness by foreign donors and investors to trust in future stability. Even in the IMF, there was disagreement how the Fund best could assist Guinea-Bissau, given the broad base of challenges and the country's poor ability to receive any kind of aid.
The IMF however promised to "remain engaged in Guinea-Bissau" as the current government had dramatically changed its economic policy. The Fund welcomed the new government's economic program for 2004-08, which it "considered a good basis for beginning to address Guinea-Bissau's problems."
The new economic programme focuses on strengthening tax collection and pursuing structural reforms "to boost growth and reduce poverty." The IMF stressed the need for "rapid deregulation of the economy, which would be a low-cost measure yielding quick results," the report said.
By staff writer
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