Outlook for 2011-12

Political instability is set to continue in Guinea-Bissau as the president, Malam Bacai Sanhá, struggles to manage the fragile balance of power between the country's political and military leaderships. This is jeopardising the resumption of donor aid, upon which growth depends. Nonetheless, modest donor inflows, further recovery in cashew output, the first trickle of foreign direct investment and a revival in domestic demand will drive real GDP growth of 4.5% in 2011 and 4.8% in 2012. Inflation is forecast to rise to an average of 3.4% in 2011-12, on the back of resurgent international food and energy prices. The current-account deficit will remain broadly unchanged in 2011, at 10.5% of GDP, before narrowing to 8.5% of GDP in 2012.

The political scene

In late January the EU decided to begin Article 96 consultations with the Bissau-Guinean government, in the wake of its concerns over alleged infringements of human rights and the rule of law. The prime minister, Carlos Gomes Júnior, has reiterated his country's determination to fight drug-trafficking. The government has followed up with a number of high-profile actions, including the establishment of an anti-narcotics agency. There has been a further strengthening of ties with Angola. In addition to support for Guinea-Bissau's security sector reform, Angolan assistance has been instrumental in helping the country's television station to resume its transmissions after a five-month closure.

Economic policy

In a joint staff report, the IMF and World Bank have highlighted the progress that Guinea-Bissau has made with respect to a number of key education and health indicators. Primary school enrolment rates have risen from 42% in 2000 to 65% in 2010. The African Development Bank (AfDB) confirmed in late January that Guinea-Bissau had met the conditions for debt relief under the enhanced heavily indebted poor countries (HIPC) initiative. In response, the AfDB has approved a US$60.4m debt-relief programme, as well as a US$23.7m additional debt cancellation granted on an exceptional basis.

The domestic economy

The UN World Food Programme (WFP) has agreed to extend its post-conflict relief and recovery operation until the end of 2011, at a cost of US$8m. Businessmen from China and Syria have expressed interest in investing in Guinea-Bissau's economy.

Foreign trade and payments

Foreign-exchange reserves remained close to a record high throughout most of 2010.

Land area

36,125 sq km

Population

1.61m (2009 IMF estimate)

Main town

Bissau (capital), population 384,960 (2009 census)

Weather in Bissau

Tropical: hottest month, April, 23-33°C; coldest month, January, 19-23°C

Languages

Portuguese, Crioulo, French, Balanta, Fula, Manjaco, Mandinga, Pepel

Measures

Metric system

Currency

In May 1997 the peso was replaced with the CFA franc at an exchange rate of P65:CFAfr1

Time

GMT

Public holidays

January 1st; January 20th (Heroes' Day); March 8th (Women's Day); May 1st; August 3rd (start of anti-colonial struggle); September 24th (Independence Day); November 17th; December 17th; December 25th

Official name

República da Guiné-Bissau

Form of state

Unitary republic

Legal system

Based on the 1984 constitution, which was revised in 1993 and 1999; a new constitution was passed by parliament in April 2001 but has yet to be enacted by the head of state

National legislature

Assembléia Nacional Popular, with 100 members, elected for a four-year term

National elections

November 2008 (legislative); July 2009 (presidential); the next legislative election is scheduled for 2012 and the next presidential election for 2014

Head of state

President, Malam Bacai Sanhá, elected in July 2009

National government

The president appoints the prime minister, who presides over a Council of Ministers; a government was appointed in January 2009 following the legislative election of November 2008, and reshuffled in October 2009; the government's 28 members all hail from the Partido Africano da Independência da Guiné e Cabo Verde (PAIGC)

Main political parties

Partido Africano da Independência da Guiné e Cabo Verde (PAIGC; 67 seats); Partido da Renovação Social (PRS; 28 seats); Partido Republicano para a Independência e o Desenvolvimento (PRID; three seats); Partido para a Nova Democracia (PND; one seat); Aliança Democrática (AD; one seat)

President: Malam Bacai Sanhá

Prime minister: Carlos Gomes Júnior

Key ministers

Agriculture, fisheries & rural development: Barros Bacar Banjai

Civil service, labour & state modernisation: Fernando Gomes

Defence & veterans' affairs: Aristides Ocante da Silva

Economy, planning & regional integration: Maria Helena Nosolini Embaló

Education, culture, science, youth & sports: Artur Silva

Energy & natural resources: Higino Lopes Cardoso

Finance: José Mário Vaz

Foreign affairs: Adelino Mano Queta

Health: Camilo Simões Pereira

Infrastructure, transport & communications: José António da Cruz Almeida

Interior: Dinis Kablon Na Fantchamna

Justice: Mamadu Djalo Pires

Presidency of the council of ministers, social communication & parliamentary affairs: Maria Adjatu Djalo Nandigna

Territorial administration: Luís de Oliveira Sanca

Trade, industry, tourism & crafts: Botche Candé

Women, family & fight against poverty: Lurdes Vaz

Regional central bank governor

Jean-Baptiste Compaoré (interim)

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Political instability is set to continue over the forecast period, owing to the country's weak and divided civilian leadership, the rising influence of the military and the ongoing expansion of drug-trafficking activity through Guinea-Bissau's territory. The civilian president, Malam Bacai Sanhá, was elected in the wake of the assassination in March 2009 of the former president, João Bernardo Vieira, and the army chief, General Tagme Na Wai, and is struggling to maintain the fragile balance of power between the country's political and military leaderships. The president is widely viewed as a consensus figure and expectations had been high that his election would mark a definitive break from the era of Mr Vieira, which was characterised by tensions between the president, his government and the army, as well as political instability and periodic coup attempts. However, Mr Sanhá's poor health and fractured relations with the prime minister, Carlos Gomes Júnior, are weakening his effectiveness.

In contrast, the army chief, General António Indjai, and the navy chief, Rear-Admiral José Américo Bubo Na Tchuto, are increasingly calling the political shots, both having been confirmed in their roles by Mr Sanhá following the military mutiny of April 1st 2010. Their double appointment, against the express wishes of donors and regional partners, has called into question the entire basis of the political settlement that followed Mr Sanhá's election. Although the military has insisted that it is subordinate to the country's political leaders, there is growing evidence that military leaders are becoming the true centres of power, reducing Mr Sanhá and Mr Gomes Júnior to figureheads. This is particularly damaging to the country's interests, as the two military leaders are strongly suspected of having links to drug-trafficking networks and as the international community has been discussing targeted sanctions against them.

The current situation has again prevented donors from re-engaging fully with the country, denying the government the inflows of funding that it desperately needs to boost public spending and rehabilitate the country's shattered infrastructure. In late January the EU opened a consultation procedure with the government of Guinea-Bissau in order to investigate more fully the country's political situation. If the discussions do not lead to an agreement over further reforms, Guinea-Bissau may face a protracted suspension of the development co-operation provided by the EU, one of the country's main partners.

One of the conditions set by the EU for the full resumption of co-operation is likely to be a strong commitment on the government's part to the long-delayed security sector reform (SSR). This reform is also being supported by the regional grouping, the Economic Community of West African States (ECOWAS), and the Comunidade dos Países de Língua Portuguesa, under the aegis of Nigeria and Angola respectively. A roadmap for SSR has been drawn up and is now awaiting the final endorsement of ECOWAS governments. SSR is essential for future political stability and the creation of modern and affordable armed forces, which are currently weighed down by outdated equipment and a bloated officer corps. However, this process is opposed by sections of the army leadership, who fear a reduction in their political influence and living standards, greatly increasing the policy's political risks for the government.

In the meantime, the military's growing interference is in danger of shattering the fragile political consensus achieved both within the ruling Partido Africano da Independência da Guiné e Cabo Verde (PAIGC) and between the main political parties. Although there have been indications in recent months of an increasing dialogue between Mr Sanhá and Mr Gomes Júnior on key policy matters, there is no guarantee that this improved relationship will be sustained for very long. Meanwhile, opposition leaders-especially the former president and current leader of the Partido da Renovação Social (PRS), Kumba Yala, who has set his sights on the presidency in 2014-will be looking for the chance to exploit any divisions. As a result, the opportunity provided for a new era in Guinea-Bissau's politics by the death of Mr Vieira and the election of Mr Sanhá is in danger of being lost, returning the country to its previous pattern of unstable governments and periodic coups.

The next legislative election is due to be held in late 2012, at the end of the forecast period. The polls will be a showdown between the two largest parties in the National Assembly-the ruling PAIGC and the PRS-although several small parties could win a handful of seats. The PAIGC is consumed by factionalism and in-fighting, which will only intensify should Mr Gomes Júnior decide to withdraw from politics, triggering a battle over his succession. The PRS will do its utmost to exploit divisions within the PAIGC ahead of the polls as it seeks to win a parliamentary majority and lay the groundwork for Mr Yala's likely presidential election bid in 2014. As a result, the run-up to the election will be bitter and divisive, and there is a real risk that the political violence that preceded the 2009 presidential poll will be repeated.

The rising influence of the military hangs over the electoral process, and the risk of a further coup attempt-or even a military seizure of power-remains high, which would lead to the legislative election being postponed indefinitely. The next presidential election is not due until 2014. Should Mr Sanhá be forced to step down because of ill health, the constitution mandates that his position would be filled temporarily by the president of the National Assembly, and a presidential election would be required to be held within 60 days.

Relations with Guinea-Bissau's development partners, which had improved markedly in the wake of Mr Sanhá's election victory in July 2009, are deteriorating once more, primarily because of the appointment of General Indjai and Admiral Na Tchuto as army and navy chief respectively. Although the World Bank and the IMF remain actively engaged in the country, donors have suspended aid and involvement in SSR, as well as a proposed roundtable to raise pledges for national reconstruction. The gap in funding is being partly filled by China and Angola. China has offered generous budget support and credit lines as part of efforts to expand its influence across the region. Both countries could soon displace Portugal as Guinea-Bissau's key development partner and advocate on the world stage. The interest of the US and the EU in the country will remain focused on its position as a nexus in trafficking networks run by South American drug cartels. ECOWAS, which has long played a leading role in aiding the democratic transition, is trying to revive international support for SSR and will remain the country's ultimate guarantor of security for the foreseeable future. Senegal is an important regional partner: its president, Abdoulaye Wade, favours co-operation between the two countries' military forces in order to crush dissident rebel movements in the Casamance region, which borders northern Guinea-Bissau.

The government is implementing a three-year extended credit facility (ECF) arrangement with the IMF, worth an estimated US$33.3m, which runs to 2012. The programme is focused on boosting economic expansion, with a key target of raising real GDP growth to 4.5% by 2012. The programme also aims to restrain inflation, reduce the fiscal deficit and narrow the current-account deficit. Key pledges under the ECF include a commitment to clearing the government's large stock of arrears with domestic banks and the private sector, and modernising the public administration, which will involve an overhaul of the public-sector workforce. The successful implementation of the programme and sufficient progress with reform resulted in the country reaching completion point under the heavily indebted poor countries initiative last December, when a debt write-off worth an estimated US$1.2bn became irrevocable.

The granting of the ECF in May 2010 was a major step forward for Guinea-Bissau, and offered to pave the way to a normalisation of relations with donors. However, the success of the ECF reform programme will depend on the maintenance of political stability, the support of the army and the continued engagement of donors. Following the military mutiny of April 1st 2010 and the rising influence of the armed forces over political affairs, this remains in doubt. With donors and investors withholding funding and investment, the country's recovery is in danger of faltering, while any meddling in economic policy by the military could derail the ECF, jeopardising macroeconomic stability and efforts to improve governance.

The government faces an uncertain fiscal picture after most donors suspended disbursements of budget support in the first half of 2010 because of concerns over political developments. The shortfall in budget support last year amounted to an estimated 3.2% of GDP. Under the medium-term fiscal framework negotiated as part of the ECF, the government is obliged to keep the domestic primary budget deficit below 4% of GDP, along with efforts to modernise the public administration and strengthen the provision of financial services. For 2011, the authorities have set a target for the domestic primary budget deficit of 1.7% of GDP. However, with disbursements greatly reduced and the risk of renewed political instability, the government could struggle to control spending and boost fiscal revenue through improved tax collection. Without the full resumption of donor budgetary support, the government will face problems in paying down its substantial public-sector salary arrears and will have to delay plans to clear all debt to the domestic banking sector and start repaying debt to private businesses. It will also hamper progress with reform of the cashew sector, which is essential both for reviving the sector and for increasing tax revenue. In addition, a continued compression of public investment will take its toll on overall economic growth and poverty reduction.

According to IMF data, the government ran an overall fiscal surplus (including grants) of 2.9% of GDP in 2009, reflecting an influx of donor funding that year. However, following the suspension of donor support in the wake of the April 2010 military mutiny, the Economist Intelligence Unit estimates that the fiscal balance moved back to a deficit of around 3% of GDP in 2010. Pledges of budget support from Angola and China should help to plug some of the financing gap, as should modest donor inflows, assuming a reasonable level of political stability over the forecast period. This should help to limit the fiscal deficit to an average of 3.5% of GDP in 2011-12. However, should political instability result in a military takeover, fiscal policy could go off-track rapidly, resulting in a rapid widening of the deficit and the collapse of the government's ability to meet its payments.

Monetary policy is determined by the regional central bank, Banque centrale des Etats de l'Afrique de l'ouest (BCEAO), the priorities of which are to control inflation and maintain the CFA franc's peg to the euro. Policy will therefore continue to be influenced by that of the European Central Bank (ECB). In response to cuts in the ECB's refinancing rate, the BCEAO reduced its repurchase rate (taux de pension) by 50 basis points to 4.25% in June 2009. However, we now expect the ECB to announce a 25-basis-point rise in euro area interest rates in the near future, most likely April, followed by an increase of similar magnitude by the end of 2011. A further tightening is likely in 2012, with the ECB's main policy rate reaching 2%, compared with 1% at present. The BCEAO is likely to continue to track developments in the euro zone, with gradual increases in its main policy rate, the taux de pension, during 2011-12. However, we also expect the regional central bank to continue with regular liquidity injections, which will remain its prime policy tool.

Guinea-Bissau's economic prospects are dependent on political developments, which look uncertain given the rising influence of the military and Mr Sanhá's weak grip on power. Although the risk of fresh coup attempts or assassinations remains, the growth prospects for 2011-12 are good, as donors (who have suspended budget support) are expected to maintain some funding for infrastructure and social sector projects, buoyed by fresh funding from Angola and China. We also expect the recovery in the cashew sector to continue, along with new foreign investment in phosphate mining and infrastructure. We estimate that real GDP grew by 3.5% in 2010, supported by a rebound in international cashew prices and inflows of emigrant remittances. With modest donor inflows expected in 2011-12, bolstered by further recovery in cashew output, the first trickle of foreign direct investment and a revival in domestic demand, we forecast that real GDP growth will rise to 4.5% in 2011 and 4.8% in 2012. However, there is a downside risk to this forecast relating to a potential military seizure of power, which could have a heavy impact on growth.

The sound monetary policies of the BCEAO and the improving performance of the agricultural sector will be positive factors in helping to control inflation. Nonetheless, food prices, which depend on the success of the annual harvest, are the main component of the consumer price index and will continue to have the largest impact on inflation. Despite a 14% increase in last year's cereals harvest (to 157,223 tonnes), food shortages became more acute in the second half of 2010. Reflecting the resulting upward pressure on food prices, as well as the rising cost of fuel imports, the year-on-year inflation rate accelerated from just 0.7% in June to 5.6% in December. Average inflation in 2010 rose to 2.5%. With global food and oil prices likely to remain strong, we expect inflation to rise to an average of 3.7% in 2011, before moderating slightly to 3% in 2012. However, there is a risk that inflationary levels could be higher if below-average rainfall results in a poor harvest, driving up local food prices.

The CFA franc-pegged to the euro at CFAfr655.96:EUR1-will fluctuate against the US dollar in line with the euro:dollar exchange rate. Despite the prospect of imminent policy tightening by the ECB, we still expect the dollar to outperform a euro weighed down by economic and fiscal weakness within the euro zone. The euro-pegged franc ended 2010 weaker than it started the year, averaging CFAfr495:US$1 over the year, and will continue to slide to an average of CFAfr501:US$1 in 2011 and CFAfr525:US$1 in 2012.

On the external front, export growth will be driven by the further recovery of the cashew sector. We expect the cashew nut harvest, which typically accounts for 50-80% of exports, to continue to rise in response to good climatic conditions and new investment. Although the increase in the volume of exports will be partially offset by the depreciation of the CFA franc, we expect exports to grow by an average of 7% per year in 2011-12 in US-dollar terms. At the same time, the value of imports will also rise quickly, owing to higher prices and elevated demand, boosting imports from an estimated US$210m in 2010 to US$234m in 2012. We expect the current account (including official transfers) to remain in deficit during the forecast period, averaging 9.5% of GDP in 2011-12.

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The member states of the EU decided in late January to begin consultations with the Bissau-Guinean government, in the wake of EU concerns over a possible infringement of human rights and the rule of law. The European Commission had earlier called on the country's leadership to put an end to cases of illegal detention by the military, to strengthen the powers of the civilian authorities, to restart the security sector reform and to accept an international mission to promote all of these aims. The consultation procedure is based on Article 96 of the Cotonou Agreement concluded between the EU and the African, Caribbean and Pacific countries, which allows one of the two parties to open consultations if it considers that the other party has failed to fulfil an obligation stemming from respect for human rights, democratic principles and the rule of law.

If the consultations do not lead to an agreement between the two parties, the EU may decide to adopt "appropriate measures"-which could entail an extension of its partial freeze on development co-operation with Guinea-Bissau. These measures, however, would not affect humanitarian assistance or programmes that target the local population directly, and co-operation would gradually be resumed in the case of satisfactory commitments by the government. Guinea-Bissau is set to receive a total of EUR120m (US$156m) from the European Development Fund for the period 2008-13. This sum consists of three separate components:

• reform of the administration, the security sector and the justice system to strengthen the rule of law;
• improving access to basic services, such as water and energy; and
• direct budgetary aid.

Pending the outcome of the consultation, the EU has adopted precautionary measures and temporarily suspended part of its aid. This is the second time that the EU has initiated an Article 96 consultation procedure with Guinea-Bissau. Similar consultations were set in train in January 2004, following the coup that toppled the democratically elected president, Kumba Yala, and resulted in an agreement regarding a transitional roadmap but with no suspension of co-operation. These earlier consultations were judged to be a relative success, leading to the holding of legislative elections in March 2004.

Beyond these consultations, the member states of the EU also discussed the adoption of targeted sanctions against several military officials suspected of threatening peace, security or stability and accused of being involved in drug-trafficking. The adoption of sanctions was postponed, however, under pressure from Portugal, Guinea-Bissau's former colonial power. Prior to this decision, the government of Guinea-Bissau had issued a statement expressing its surprise at the EU's plan for targeted sanctions and warning that such a course of action could lead to political and social instability in the country. The navy chief, Rear-Admiral José Américo Bubo Na Tchuto-who was rumoured to be among the potential targets-dismissed the accusations of his involvement in drug-trafficking as lies and challenged the EU to prove the allegations. Admiral Na Tchuto's assets in the US have already been frozen, after he was labelled a "drug kingpin" in April 2010 by the US Treasury's Office of Foreign Assets Control (July 2010, The political scene). The role played by senior military officers in drug-trafficking remains a key concern, following accusations that Guinea-Bissau has been transformed into a "narco-state" in recent years. Most recently, three military officers and a police officer were arrested at a military camp in November in possession of cocaine. As in previous cases, however, their fate has remained unclear and the capacity of the country's justice system to investigate the involvement of civilian and military officials in drug-trafficking has proven limited (January 2011, The political scene).

Following the announcement of the consultation procedure by the EU, the government dispatched several missions to urge the EU to avoid taking harsh measures against Guinea-Bissau. A mission led by the foreign minister, Adelino Mano Queta, was sent to several European capitals, while the prime minister, Carlos Gomes Júnior, undertook a three-day-long visit to the capital of neighbouring Senegal, Dakar, where he met with European diplomats. Mr Gomes Júnior reiterated his country's determination to fight drug-trafficking and said that he was willing to co-operate with Interpol and the UN Office on Drugs and Crime (UNODC). Mr Gomes Júnior also attended a UN Security Council meeting in late February in order to dissuade the international community from imposing sanctions. During the meeting, the UN secretary-general's special representative in Guinea-Bissau, Joseph Mutaboba, called on the government to allow foreign investigators to patrol the country's territorial waters in conjunction with the Bissau-Guinean police.

In an attempt to demonstrate its determination to combat drug-trafficking, the government has made a number of announcements and followed up with a series of high-visibility steps. A cabinet statement released in early January confirmed that the government would close the Cufar airstrip, situated 300 km to the south of the capital, Bissau, and allegedly used by drug-traffickers. Mr Gomes Júnior also instructed the ministries of defence and of the interior to heighten vigilance on all airstrips around the country. An anti-narcotics agency has been created, with police, migration services, borders and customs staff. The agency, which was established following an agreement signed between the ministries of justice, finance and the interior, forms part of a commitment by the Economic Community of West African States (ECOWAS) to fight drug-trafficking and organised crime in the region and is the result of co-operation and partnership between the governments of Guinea-Bissau, Sierra Leone, Côte d'Ivoire and Liberia, with the support of UNODC and the EU. Finally, the police publicly burnt 76 kg of cocaine and 800 kg of cannabis in February in front of the justice minister, Mamadu Djalo Pires, and the public prosecutor, Amine Michel Saad. However, Mr Saad commented critically on the country's anti-drug-trafficking strategy a few days later, emphasising its lack of coherence. The public prosecutor noted that it was necessary to define each body's areas of intervention and competence and warned that any civilian or military entities that seized drugs and refused to give them to the police would be considered to be drug dealers and therefore prosecuted as such. Major drug seizures in Guinea-Bissau have indeed "disappeared" in the past, notably in 2007, when 674 kg of cocaine seized during a drug raid in September 2006 subsequently vanished from a safe in the national Treasury (July 2007, The political scene).

The legal investigation into the killings of the former army chief-of-staff, General Tagme Na Wai, and of the former president, João Bernardo Vieira (known as "Nino" Vieira), seems to have reached a dead end two years after the double assassination (April 2009, The political scene). Five army officers, who had been arrested shortly after the assassinations, were released at the end of December owing to a lack of evidence. On the second anniversary of the killings in early March, the prime minister, Carlos Gomes Júnior, vowed to accelerate investigations into all political crimes perpetrated in Guinea-Bissau and said that he had asked the UN Security Council to send an independent commission to the capital, Bissau, to investigate the two cases. The EU has also pressed for quicker progress in the investigation. Guinea-Bissau's public prosecutor, Amine Michel Saad, however, noted that investigators were having difficulty gathering sufficient evidence, particularly regarding the Vieira assassination, and that more patience was needed. This statement was greeted with anger by the victims' families and their spokesperson, Roberto Cacheu, who called on Mr Saad to resign if he was unable to make more rapid progress.

The former armed forces chief, General José Zamora Induta, was released from prison in late December, along with the former head of the military information services, Colonel Samba Djaló, and five other officers who had been arrested following the double assassination in March 2009 of the army chief-of-staff, General Tagme Na Wai, and the president, João Bernardo Vieira. Their release took place a few days after the European Commission proposed opening consultations with the government, partly in response to cases of illegal detention by the army. General Induta and Colonel Djaló had been arrested immediately after the mutiny of 1st April 2010 and detained thereafter in army barracks in Mansâo, 60 km north of Bissau (July 2010, The political scene). General Induta had been accused by his former deputy and the current armed forces chief, General António Indjai, of plotting to murder military officers, including him, and of embezzling army funds. However, no charges have been brought against him so far. General Induta, who has been placed under house arrest and forbidden to leave the country, said that he had been released on the orders of General Indjai, who had acted upon the request of the president, Malam Bacai Sanhá, and of the government.

The interior minister, Hadja Satú Camará Pinto, resigned in late December following a two-month-long dispute with the prime minister, Carlos Gomes Júnior. Ms Camará Pinto had been suspended in late October by Mr Gomes Júnior after having appointed and promoted a number of police officers. This was in violation of a decree by Mr Gomes Júnior prohibiting new appointments in the security services in order to avoid disrupting the reform process. However, Ms Camará Pinto had decided to ignore her suspension, claiming that she would await her formal removal by the president, Malam Bacai Sanhá, of whom she is known to be a long-standing political ally. In the meantime, the minister for territorial administration, Luís de Oliveira Sanca, was ostensibly in charge of both ministries (January 2011, The political scene). Mr Sanhá, however, was unable to defend Ms Camará Pinto owing to his poor health and prolonged hospitalisation in Dakar, Senegal. Ms Camará Pinto eventually decided to put an end to the dispute, noting in her resignation letter that her suspension was unconstitutional since it required the approval of the president. Dinis Kablon Na Fantchamna, the former head of the civilian office at the presidency, was immediately appointed as the new interior minister.

As Guinea-Bissau risks losing the support of some key aid donors, Angola appears to be one of its strongest bilateral partners in its current efforts to relaunch long-awaited reforms and regain international legitimacy. In December the Bissau-Guinean National Assembly endorsed a US$30m bilateral agreement with Angola in support of security sector reform. The techno-military and security co-operation programme between the two countries was officially launched in early January, during a visit to Bissau by an Angolan delegation headed by the secretary of state for foreign affairs, Manuel Augusto, and including high-ranking officials from the ministries of foreign affairs, defence and home affairs. This was followed by a visit to Angola by a Bissau-Guinean military-judicial delegation in late January. The team, led by the chief justice of the military high court, Eduardo Costa Sanhá, met the Angolan defence minister, Candido Pereira Van-Dúnem, and was briefed on how military courts operate in Angola. The first group of Angolan military and police officers who have been chosen to support Guinea-Bissau's new security sector reform were expected to be deployed by the end of February.

Angola's support has also been instrumental in helping Guinea-Bissau's national television station, Televisão da Guiné-Bissau (TVGB), resume its transmissions following a five-month closure. TVGB had been unable to repair its broken transmitters because of a lack of funds (January 2011, The political scene). A co-operation accord signed with the Angolan media ministry, however, paved the way to the rapid repair of the transmitters and the resumption, in December, of news service broadcasts. Maria Abiatu Djaló Nandinga-who in addition to her other briefs is Guinea-Bissau's minister of social communication-said that the next step in the Angolan-supported initiative would be the full resumption of all the station's programmes, together with the training of staff and development of new programmes.

In their joint staff advisory note on the second annual progress report of Guinea-Bissau's poverty reduction strategy paper (PRSP), the IMF and World Bank teams note that the country has made progress with respect to most indicators covering education and health. The teams base their assessment on figures obtained from the Multiple Indicators Cluster Survey (MICS) conducted by the UN Children's Fund (UNICEF) in 2010. According to the survey, primary school enrolment rates rose from 42% in 2000 to 45% in 2006, subsequently increasing to 65% in 2010. A similar trend is observed in gender equality in education, with the ratio of girls' to boys' enrolment expanding from 0.67 in 2000 to 0.83 in 2006 and to 0.94 in 2010. Linked to this trend, the illiteracy rate among women of 15-24 years has decreased significantly, from 83% in 2000 to 72% in 2006 and to 61% in 2010. In the health sector, the results have also been impressive, with child mortality falling from 223 deaths per 1,000 births in 2006 to 155 in 2010. Infant mortality followed the same pattern, falling from 138 deaths per 1,000 births in 2006 to 104 in 2010. Finally, the cholera awareness and prevention programme led by the national health authorities and their non-governmental organisation (NGO) partners has been effective, insofar as there have been no new outbreaks in either 2009 or 2010.

The IMF-World Bank report attributes these improvements to a broadening in access to social services-due, in turn, to reforms carried out by the government, backed up by the contribution of NGOs and the private sector, as well as demand-side developments. The IMF-World Bank teams point, in particular, to the elimination of school fees and the introduction of school feeding programmes in most primary schools, which had a major impact on enrolment rates, notably on girls' enrolment in rural areas. Large-scale vaccination campaigns, effective distribution of bed nets and improvements in health facilities also had positive effects with regard to infant mortality and maternity services. The joint staff advisory note underlines, in particular, that an incentive premium for healthcare workers operating in isolated rural areas, retroactive to 2009, had been paid in full and that these incentives had been formally incorporated into pay scales.

While the IMF and World Bank teams paint a positive picture in overall terms, they also note that political instability has repeatedly compromised the ability of successive governments to provide essential public goods and services and has contributed to the exodus of qualified personnel. Political discontinuity has also weakened government ownership of the PRSP process and promoted inconsistency in government actions. The teams therefore emphasise the need for improved political stability, together with ongoing support from development partners.

The board of directors of the African Development Bank (AfDB) confirmed in late January that Guinea-Bissau had met the conditions that enable it to qualify for debt relief under the enhanced heavily indebted poor countries (HIPC) initiative. In response, the AfDB approved a US$60.4m debt-relief programme, as well as a US$23.7m additional debt cancellation granted on an exceptional basis. The IMF and the World Bank announced in December that Guinea-Bissau had reached HIPC completion point after meeting the necessary criteria, including the implementation of a national poverty-reduction strategy and the maintenance of macroeconomic stability. The AfDB's debt cancellation forms part of a total irrevocable debt write-off worth US$1.2bn, which should help to reduce the country's stock of external debt from an estimated 126.4% of GDP at end-2009 to a more sustainable 28.4% of GDP (January 2011, Economic policy).