By Judith Ugwumadu | 18 February 2014

Guinea-Bissau should make spending controls tighter and improve its cash management system to reduce the continued build up of salary arrears in its cashew trade, the International Monetary Fund has urged.

The West African nation is one of the ten poorest countries in the world. As the fifth-largest cashew producer, its exports of the nuts are a top earner for the country and 84% of the rural population depends on the cashew industry for its livelihood, according to World Food Programme.

An IMF team, under fiscal affairs chief Mauricio Villafuerte, visited Bissau from February 10-13 and concluded today that: ‘Growth and fiscal prospects for 2014 hinge on the success of the cashew campaign and external support.

‘The [IMF] mission highlighted the importance of setting clear policy guidelines as soon as possible to avoid the uncertainty that undermined last year’s cashew campaign. In this context, the mission suggested to suspend contributions toward the industrialisation programme.’

The IMF continued: ‘Low fiscal revenue and weak international financial support have led to an accumulation of salary arrears in recent months.

‘Despite a fall in government expenditure the overall fiscal deficit on a commitment basis was 2.2% of gross domestic product in 2013, while arrears amounted to about 1.2% of GDP.’

Given the limited revenue prospects in coming months, particularly before the start of the cashew campaign, the IMF called ‘for strict spending controls and prudent cash management to minimise further accumulation of arrears’.

‘The [IMF] looks forward to a positive resolution of the political instability and to the start of a dialogue with a newly-elected government to help address the country’s economic and development challenges.’