IMF suspends Guinea-Bissau payments due to bailout of banks, demands reversal of move

Other lenders may withdraw support to Guinea-Bissau as well, as an IMF programme also signals that the country’s macroeconomic policies are sound

THE International Monetary Fund said it will halt upcoming payments under its loan programme with Guinea-Bissau until the government reverses a decision to bail out two banks.

The IMF envisaged its support for the West African nation at 6.1 billion CFA francs ($10.5 million) this year, Oscar Melhado, the fund’s country representative, said in an e-mailed response to questions on Friday. In the absence of future IMF funding, the budget shortfall would increase to 3.1% of Guinea-Bissau’s gross domestic product this year after donors suspended aid worth 2.1% of economic output, he said.

“The bailouts implied an immense overrun in net credit” totaling 34 billion CFA francs, or 5.5% of GDP, Melhado said. “Other development partners may withdraw their support to Guinea-Bissau as well, as an IMF programme also signals that the country’s macroeconomic policies are sound.”

The country of 1.7 million people is Africa’s second-largest producer of cashew nuts. The nation has had three coups and one president assassinated since 2009.

-Bloomberg

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