Guinea-Bissau

Country Summary

Macroeconomic performance

Real GDP growth stabilized at an estimated 5.3% in 2018, slightly below the 5.9% in 2017, supported by robust agriculture (with 6.3% growth) and fisheries (with 8.3% growth). The country relies heavily on agriculture, especially rice and cashew nut production. Agriculture accounts for 45.3% of GDP, almost 85% of total employment, and more than 90% of exports. On the demand side, growth was driven by exports and private consumption.

The government has maintained a restrictive fiscal policy and improved revenues, so the budget deficit remained moderate at an estimated 2.5% of GDP in 2018. Total public debt declined to 49.2% of GDP in 2017 from 55.1% in 2014 through debt restructuring. Guinea-Bissau is at a moderate risk of debt distress.

Inflation was an estimated 2.0% in 2018, up from 1.4% in 2017, driven by high domestic demand and rising prices for rice and other essential food items.

The current account deficit deteriorated to 3.2% of GDP in 2018 from 0.6% in 2017, despite sharp increases in cashew nut export volume and international prices. About 90% of Guinea-Bissau’s exports are from cashew nut, while imports are dominated by machinery and construction materials (19%), fuel and refined products (18%), services (16%), and food and agricultural products (12%). Official reserves stood at $3.3 billion (or 4.6 months of imports) in 2018.

Tailwinds and headwinds

Real GDP is projected to grow by 5.1% in 2019 and 5.0% in 2020, supported by favorable cashew nut prices amid weaker harvests and by high public investment in energy, construction, and water supply. Overall,

inflation is projected to be 2.2% in 2019 and 2.3% in 2020, below the 3% convergence criterion for the West African Economic and Monetary Union.

The current account deficit was an estimated 3.2% of GDP in 2018 and is projected to reach 2.3% in 2019 because of increased investment and a rising import bill of higher oil prices.

The economic outlook is highly uncertain due to political instability and volatile cashew prices, the main income source for more than two-thirds of households. Other headwinds include risks from banking instability, higher-than-expected oil prices, and heavy reliance on rain-fed agriculture that can be threatened by adverse weather.

The large concentration of domestic currency debt (39.7% of GDP) could threaten the banking sector. Improved public financial management is thus key to avoiding crowding out private investment. The government is rationalizing public expenditure through a zero-program target (zero nonregularized expenditures, zero new arrears, and zero credit to the central government from commercial banks).

Sustaining strong and inclusive growth requires addressing infrastructure gaps. Only 10% of the national road network is tarred, and the national energy access rate is about 14.7%. Health and education services remain dire, held back by political instability and weak governance. The country ranked 178 of 188 on the Human Development Index in 2016. Poverty affects more than 70% of the population. Income inequality, measured by the Gini index, was last estimated at 50.7, as women remain marginalized with constrained access to credit and professional training. Managing fragility and resolving political and institutional instability will lay a solid foundation for development.

Source: African Economic Outlook 2019

Fixed Income

Issuance strategy 

Guinea-Bissau's debt ratio is estimated at 56.1% in 2018, up 2.2 percentage points compared to 2017. This increase is explained by slower growth in 2018 compared to 2017 and by the deterioration of the budgetary balance and the balance of the current account. Indeed, Guinea-Bissau's budget deficit fell from 1.4% of GDP in 2017 to 3.8% of GDP in 2018, a deterioration of 2.4 percentage points. This deterioration can be explained by the weakness of the resources mobilized compared to the increasing costs, in particular for the purposes of financing the National Development Plan (Terra Ranka, 2015-2020).[Source: UMOA-Titres].

Yield curve 

As part of its market development activities, the UMOA Titres Agency has carried out a project to set up issuers' yield curves of the Public Securities Market of the UEMOA zone (MTP) with objective:

  • to improve transparency on the MTP
  •  to contribute to better price formation during the auctions
  • to make investors aware of the relationship between primary and secondary markets
  • to provide local / international investors with a reference of price for securities issued by the States

The conditions for  yield curves constructions  have not yet all been observed on the (MTP). It was thus retained:

  • in the short term, to develop a first version of yield  curves taking into account the specificities of the MTP, while being sufficient evolutionary to support its development;
  • in the medium / long term, define the necessary ways and means to Continuous improvement yield curves models following the evolution of the MTP.

Guinee Bissau government securities yield curve extends to 5 years.

Yield curve calculation models 

The yield curve is constructed on the basis of primary market returns. The model used is the Nelson-Siegel Svensson .  

Interpolation methods 

Linear interpolation. 

Yield curve managed by

Agence UMOA-Titres is responsible for the yield curve. 

Display platform 

Agence UMOA-Titres website 

Challenges in building an efficient yield curve 

  • Fragmentation of the market

  • Narrow investor base: comprising homogeneous investors such as banks. 

  • Low liquid secondary market

Guide to Buying Bonds

Procedures for market participation

The primary subscription of Treasury bonds and bonds is reserved for credit institutions, management and intermediation companies (SGI) as well as regional financial institutions with a settlement account in the books of the Central Bank.

Other investors, natural or legal persons, irrespective of the State in which they are established, may also subscribe to Treasury bonds and bonds on the primary and secondary market through credit institutions and SGI. located in the territory of the Union.

Emissions on the primary market of the MTP (Marché des Titres Publics) are made by auction.Each issuance should be advertised at least 7 days before the auction by describing the issuance characteristics. Bidders submit to the Central Bank, sealed in a ballot box reserved for this purpose, a submission form specifying the amounts and the interest rates or the price offered. Submissions may also be made electronically in the conditions defined by the Central Bank.

Later than one hour after the deadline for bids submission, the National Directions of the BCEAO transmit electronically, by fax or any other means of rapid communication accepted by the Central Bank, the main submissions to the principal agency of the BCEAO, which is organizing the auction.

Treasury bills are eligible for refinancing by the Central Bank. Investors and the Central Bank may buy or sell Treasury bonds on the secondary market, awarded by private treaty. In this context, they are required to post the purchase price and sale, which they are willing to transact.

Bond issues can be done by  syndication  managed by CREPMF.[http://www.crepmf.org/Wwwcrepmf/Reglementation/pdf/Instructions/INSTRUCTION_N36_2009.pdf]

Treasury bonds can be traded on the secondary market. As such, they can be exchanged at the Regional Stock Exchange (BRVM) or outside the BRVM.

Settlement cycle

On the primary market by auction, the settlement date is T+1 of the issue date.On the secondary market, the payment of purchases of Treasury bonds and bonds by the primary subscribers is made by debiting their settlement account with the Central Bank on the value date of the issue of these securities. settlement date is the first business day following the conclusion of the transaction for domestic transactions and the third business day following the conclusion of the transaction for transactions between two (2) Member States. The Contracting Parties are free to agree on a term greater than these minima for the settlement of transactions, IF the instructions given by both parties are identical, the transaction is directly offset on the agreed value date. In the event of a discrepancy, the Central Bank suspends the transaction and notifies both parties of this decision for correction.

Taxation

Treasury bills and Treasury bonds incomes are tax-free throughout the territory of the Member States of the WAEMU.But for non-members, the tax rates are different from one country to another. In Guinea-Bissau, the tax rate one securities income is equal to maximum 6%.

Rating

Rating Agency Current rating Outlook
Moody’s No rating No outlook
Fitch No rating No outlook
Standard and Poor’s No rating No outlook

Primary Dealers

The securities market has a system of Specialists in Treasuries. The credit institutions and the SGIs  may be approved as SVT under the conditions specified by an Instruction of the Central Bank. As such, they must respect certain commitments that confer special advantages. These commitments and benefits are specified by an instruction from the Central Bank.

List of Primary Dealers

BANQUE REGIONALE DE MARCHES

IMMEUBLE LA ROTONDE RUE DR THEZE X ASSANE NDOYE

+221338896080

CORIS BANK INTERNATIONAL

1242 AVENUE DU DR KWAME N’KRUMAH

+22625312323

UNION TOGOLAISE DE BANQUE

BOULEVARD DU 13 JANVIER NYEKONAKPOE

+22822234300

Market restrictions

Openness to international investors

No restrictions prevent foreign investors from trading in the public securities market. They may subscribe to Treasury bonds and bonds on the primary and secondary markets through credit institutions and SGI located within the Union.  

Capital controls

There are no significant limits on foreign investment nor are there generally differences in treatment of foreign and national investors, either in terms of the level of foreign ownership or sector of investment.

Restriction on FX and profit repatriation

WAEMU has unified foreign exchange regulations. Under these regulations, there are no restrictions for transfers within the community, and designated commercial banks are able to approve routine foreign exchange transactions inside the community. The transfer abroad of the proceeds of liquidation of foreign direct investments no longer requires prior governments approval.

Documents & Resources

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