- Guinea-Bissau Nears Final IMF Review as Fiscal Deficit Falls to 4.2% Of GDP
Guinea-Bissau has reached a staff-level agreement with the International Monetary Fund on the twelfth and final review of its Extended Credit Facility (ECF) programme, setting the stage for a possible US$1.6 million disbursement as the country seeks to preserve fiscal gains and manage risks from high fuel costs.
The agreement remains subject to approval by IMF management and consideration by the Executive Board. If the review is completed, total disbursements under the arrangement will reach SDR39.76 million, equivalent to about US$53.9 million.
The final review comes as the government reports a marked narrowing of the fiscal deficit, from 8.2% of gross domestic product in 2023 to a projected 4.2% in 2026.
That adjustment of about four percentage points signals a significant improvement in public finances, although sustaining it will depend on revenue performance, spending discipline and the country’s ability to withstand economic and political shocks.
Economic growth is projected at 4.8% in 2026, supported by a strong cashew export campaign. Export volumes have exceeded expectations, surpassing the 2025 level by nearly 12%. Stronger customs controls have contributed to the performance, helping support farmer incomes and economic activity.
The cashew season is a welcome source of momentum in an economy where agricultural exports remain central to income and foreign exchange. But a strong harvest does not remove the risks of relying on a narrow export base. Adverse weather, weaker global prices or disruptions to trade could quickly affect revenue, rural incomes and foreign-exchange availability.
The IMF has urged the authorities to maintain fiscal discipline and strengthen revenue collection against that uncertain backdrop.
Inflation was reported at minus 0.7% year-on-year at the end of September 2026, despite higher international fuel prices. The IMF attributed the decline to lower food prices and controlled domestic fuel prices.
The negative rate indicates that the measured price level was lower than a year earlier; it does not, by itself, establish that households have experienced a broad or lasting improvement in purchasing power.
The government’s fuel-price controls have also carried a fiscal cost. The 2026 deficit is projected to remain at 4.2% of GDP partly because stronger cashew revenues and tighter expenditure controls have been offset by compensation paid to fuel importers for losses arising from regulated pump prices.
That arrangement may cushion consumers from international price increases, but it transfers part of the cost to the public budget.
This creates a policy trade-off. Keeping fuel prices controlled can limit immediate pressure on households and transport costs, yet compensation to importers can become a recurring fiscal burden if global prices stay high.
The challenge for the government will be to protect vulnerable consumers without allowing the cost of price controls to erode the gains made through fiscal adjustment.
Public debt is projected at about 74% of GDP at the end of 2026, broadly unchanged from its level at the end of 2025. The IMF has stressed that prudent borrowing will be necessary to keep debt on a firm downward path over the medium term.
That warning is particularly relevant as the country enters the period after the final review: the end of a programme does not end the need for credible budget choices, revenue mobilisation and careful borrowing.
The draft 2027 budget is intended to preserve the programme’s gains while continuing to reduce public debt. IMF mission chief Niko Hobdari said it “strikes the right balance between maintaining fiscal discipline and creating space for the investments needed to support growth and development.”
Whether that balance is achieved will depend on the final budget’s revenue assumptions, expenditure priorities and execution.
The programme’s reported institutional gains may prove as important as the immediate financing. The IMF said the ECF-supported arrangement helped strengthen domestic revenue administration, public financial management and debt management. These systems are essential if the government is to maintain budget credibility after IMF reviews stop providing a regular external checkpoint.
The next phase of reform will need to focus on improving tax compliance, executing public investment more effectively, addressing vulnerabilities in the financial sector and strengthening social assistance.
Better revenue collection can help fund services and infrastructure without relying excessively on borrowing. Stronger public investment execution can ensure that approved development spending translates into completed projects and economic returns.
Safety nets can help protect low-income households from fuel and food price shocks.
The outlook remains exposed to significant downside risks, including adverse weather, negative terms-of-trade shocks, political uncertainty and tighter financing conditions. Each could weaken exports or raise borrowing costs.
The cashew performance gives the government a stronger near-term foundation, but the fiscal adjustment will be more resilient if revenue sources broaden and public spending delivers greater value.
The IMF staff-level agreement is therefore both a financing milestone and a handover point. The potential US$1.6 million tranche is modest relative to the programme’s total disbursements, but completing the final review would provide an external endorsement of policy performance and close the current arrangement. That endorsement remains conditional on Executive Board approval.
For Guinea-Bissau, the central test will be what follows. The four-point deficit reduction and stronger cashew exports provide evidence of progress, while public debt near 74% of GDP, fuel compensation costs and export concentration underscore the work still ahead.
The durability of the gains will depend on whether the government can preserve fiscal discipline while investing in the institutions, infrastructure and social protection needed to sustain inclusive growth beyond the IMF programme.
