Guinea-Bissau - Joint World Bank -IMF Debt Sustainability Analysis

Overview & Synopsis

Guinea-Bissau remains at high risk of external and overall debt distress, unchanged from the previous Debt Sustainability Analysis (DSA). A recent upgrading of Guinea-Bissau’s assessed debt carrying capacity results in mechanical signals of moderate risk of external debt distress. However, judgement is applied to maintain the risk of external debt distress at high because there are strong indications that non-residents hold a large share of Guinea-Bissau’s public debt denominated in local currency and standard export shocks lead to multi-year breaches, indicating limited buffers. That said, the stock of external debt has been steadily reduced through the prudent borrowing policy under the ECF supported program and the International Development Association’s (IDA) Sustainable Development Finance Policy (SDFP). The PV of public debt to gross domestic product (GDP) ratio breaches the benchmark for a prolonged period. However, public debt is assessed as sustainable based on the authorities’ commitments to fiscal consolidation. Public debt declined from 82.4 percent of GDP in 2024 to 75.1 percent in 2025, supported by larger nominal GDP growth, favorable FX movement, and smaller stock-flow discrepancy and overall deficit. Public debt as a share of GDP is projected to decline below the WAEMU criteria (70 percent of GDP) in 2028. The authorities remain committed to a prudent borrowing policy and fiscal consolidation, which are the key drivers to reduce external and public debt. Despite spending overruns through August 2025, the authorities renewed their program commitments and have complied with very tight spending limits in recent months. The authorities also implemented a measure to safeguard liquidity for debt service, which has proven effective to boost investor confidence and mitigate roll-over risks. The authorities’ policy commitments are underpinned by the ECF-supported program, extended through December 29, 2026.