Guinea-Bissau: Selected Issues

This Selected Issues paper focuses on domestic revenue mobilization (DRM) in Guinea-Bissau. DRM remains one of the most urgent and strategic policy priorities for Guinea-Bissau, to reduce a very high level of public debt and underpin the country’s ability to fund development needs, strengthen state capacity, and reduce reliance on volatile external grants. Despite modest reforms in recent years, tax performance remains among the lowest in the West African Economic and Monetary Union region, reflecting not only structural constraints on the economy, but also occasional policy slippages and significant enforcement gaps. This paper uses a stochastic frontier model to estimate Guinea-Bissau’s tax potential and effort relative to structural comparators. The findings suggest that the country’s widening tax gaps are primarily driven by policy and administration inefficiency rather than macroeconomic fundamentals. The analysis highlights two core sources of unrealized revenue: a large compliance gap, even among top-tier taxpayers, and a policy gap rooted in uncoordinated exemptions and outdated legal frameworks. While recent reforms—including value added tax implementation, exemption removal, and fuel tax increases—may mark a turning point, their impact will depend on sustained institutional development and targeted but continued enforcement efforts.