Political sketch
Formerly Cacheu, Bissau, and Portuguese Guinea. Independent from Portugal on 10 September 1974.
The Portuguese made contact along the Guinea coast in the 1440s. They took slaves from the coast to the Cape Verde Islands. Portugal claimed rule over the interior but did not exercise effective control there. After 1869, when Portugal abolished slavery, the Portuguese pushed into the interior in search of new profits; they did not achieve control of the interior until 1915, and occasional resistance to Portuguese rule continued until 1936. In 1879 Guinea-Bissau was separated from Cape Verde. In 1961 the African Party for the Independence of Guinea-Bissau and Cape Verde (Portuguese initials PAIGC) began guerilla warfare against the Portuguese.
Portugal granted independence on 10 September 1974, following a coup of democratically minded leftist military personnel against the Portuguese dictatorship in April 1974. A movement in Guinea-Bissau to merge with Cape Verde failed in 1977. In 1980 a coup established the Council of the Revolution, which excluded Cape Verdean blacks from its membership. Constitutional government in Guinea-Bissau returned in May 1984, and opposition parties to the PAIGC were authorized in 1991. The economy was characterized by socialist economic policies until 1986, when a change in orientation began. Multiparty parliamentary and presidential elections were first held in 1994. An army uprising in June 1998 triggered a civil war. A military coup occurred in May 1999, but a free presidential election was held in 2000.
Wars since 1500
Portuguese wars of conquest, about 1885-1915; Guinea-Bissauan War of Independence, 1962-1974 (against Portugal); Guinea-Bissau Civil War, 1998-1999.
Convertibility
The export of silver coins from Portuguese Guinea, as it was known at the time, was prohibited by Portugal, decrees of 5 November 1896 and 25 November 1909.
Portugal introduced exchange controls on 24 September 1914 and revoked them on 18 October 1937. There were also a few controls from perhaps 1939 to 1947. Controls were intensified in the summer of 1947, made extensive on 9 February 1948, and removed on 1 January 1993, long after Portugal had ceased to have any colonies except the Chinese city of Macau.
The escudo, introduced in Portugal in 1911 and in its African colonies in 1914, was a chronically weak currency until the currency reform of 1928. The Banco Nacional Ultramarino, Portugal's private monopoly note-issuer for its colonies, was not required to keep its colonial currencies at par with the Portuguese escudo, though its revised charter of 31 November 1901 did require it to accept notes of one branch at any other branch at a discount of no more than 2%, except regarding Mozambique. (The bank did not issue notes in Portugal.) In 1948 the separate colonial foreign-currency funds were centralized in Lisbon. The currency reform of 1953 unified the Portuguese escudo and the currencies of the Portuguese colonies, making them a true currency area similar to the sterling area or the French franc zone (Portugal, law of 27 June 1953). A Monetary Fund of the Escudo Zone was established by Portugal, Decree-Law 44/703 of 17 November 1962 (reprinted in Banco de Portugal annual report 1962: 129-40). On 21 February 1963 Portugal issued a ministerial decree liberalizing capital m ovements in the escudo zone (IMF ARER 1963: 313). On 1 March 1963 measures were taken to organize a new payments system for the zone (IMF ARER 1964: 390). However, Angola and Mozambique were persistently in deficit to the fund. The result was that high-priority payments were settled immediately at 1 overseas escudo = 1 Portuguese escudo, while low-priority payments experienced delays, which were a form of rationing, until the funds were available to settle them at the official rate. Exchange controls on private transfers from overseas territories to Portugal were imposed by Portugal, Decree-Law 478/71 of 6 November 1971 (reprinted in Banco de Portugal annual report 1971, v. 2: 55-67).
Other
"CFA" in CFA franc stands for Communauté Financière Africaine (African financial community) for the member countries of the Banque Centrale des États de l'Afrique de l'Ouest (BCEAO, opened 4 April 1959). It came to mean Coopération Financière en Afrique Centrale (financial cooperation in Central Africa) for the member countries of the Banque Centrale des États de l'Afrique Équatoriale et du Cameroun (BCEAC, also opened 4 April 1959), which since 22 November 1972 has been called the Banque des États de l'Afrique Centrale (BEAC).
Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): 1983-1996 (foreign currency bank debt).
Reinhart and Tokatlidis (2000: 33) dating of recent financial liberalization: Domestic (notably interest rates) 1989, external (notably foreign-exchange market and participation by foreign financial institutions) 1996.
Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): Some kind of crisis around 1988; nonperforming loans of 45% at the end of 1995, creating to a crisis 1995-1997 and requiring the recapitalization of the central bank in 1997.
Frankel and Rose (1996) list of currency crashes: 1984, 1991.
References
Primary sources:
--Laws and decrees:
Guinea-Bissau. Gazette. 1884-present. Boletim official do Governo da Provincia da Guiné Portugueza (1884-1892); Boletim official da Guiné Portugueza (1892-1898); Boletim official da Provincia da Guiné Portuguesa (1898-1927); Boletim oficial da Colónia da Guiné (1927-1951); Boletim oficial da Guiné (1951-1974); Boletim oficial (1974-present). Bolama (1884-1951); Bissau (1951-present): Imprensa Nacional.
Portugal. Gazette. 1715-present. Diário do governo (1715-1974); Diário da república (1974-present). Lisbon. Recent issues are online at <http://dre.pt/>.
UEMOA. Union Économique et Monétaire Ouest Africaine. 1996-present. Bulletin officiel. Ouagadougou, Burkina Faso : Commission UEMOA.
--Publications of monetary authorities:
Banco Nacional da Guiné-Bissau. Annual report. 1975-1990. I found no sign that the central bank published such a report.
Banco Nacional Ultramarino. Annual report. 1865-1999. Relatório do Banco Nacional Ultramarino. Lisbon: Banco Nacional Ultramarino. In English as Annual Report, 1973-1999? Lisbon: Banco Nacional Ultramarino. From 1920-1960 a separate volume appeared, entitled Relatório do Governo do Banco, parecer do Conselho Fiscal, balanço e contas referentes ao exercício de ....
BCEAO. Banque Centrale des États de l'Afrique de l'Ouest. Annual report. 1959-present. Rapport d'activité (1959-1989); Rapport annuel (1990-present). Paris (1959-1977); Dakar (1978-present): Banque Centrale des États de l'Afrique de l'Ouest.
BCEAO. Banque Centrale des États de l'Afrique de l'Ouest. Bulletin. 1959-present. Notes d'information et statistiques. Paris (1959-1978); Dakar (1978-present): Banque Centrale des États de l'Afrique de l'Ouest.
--Web site of the current monetary authority (viewed 20 September 2005):
<http://www.bceao.int>
--Other publications or Web sites:
Comité Monétaire de la Zone Franc. Secrétariat. 1953-present. Premier [etc.] rapport annuel du Comité de la zone franc établi en exécution du décret du 5 fevrier 1952 (art. 4, §2) (1953-1956); La zone franc en 1957: cinquième rapport annuel du Comité Monétaire de la Zone Franc (1957); La zone franc en ...: rapport publié par le Secrétariat du Comité Monétaire de la Zone Franc (1958-1983); La zone franc: rapport ...: publié par le Secrétariat du Comité Monétaire de la Zone Franc (1984-1991); La zone franc: rappport annuel ...; publié par le Secrétariat du Comité Monétaire de la Zone Franc (1992-2003; inside page says La zone franc en ...); Rapport annuel de la zone franc (2004-present; inside cover says La zone franc: rapport annuel ...). Paris: Imprimerie Nationale (1953-1956); Secrétariat du Comité Monétaire de la Zone Franc (1957-1991; 1957 is a mimeo with no explicit publication information); Banque de France (1992-present). Recent issues are available on the Web site of the Banque de France, <http://www.banque-france.fr/fr/eurosys/zonefr/zonefr.htm>.
Guinea-Bussau. Direccão-Geral de Estatística e Planificacão. 1975-present? Boletim trimestral de estatística. Bissau: Direccão-Geral de Estatística e Planificacão.
Main secondary sources:
Banco Nacional Ultramarino. Serviço de Documentação, Arquivo e Biblioteca. 1977. Papel-moeda para Moçambique, 1877/1973. Lisbon: Banco Nacional Ultramarino, Serviço de Documentação, Arquivo e Biblioteca. (Reproduces the bank's charter.)
BCEAO. 2000. Banque Centrale des États de l'Afrique de l'Ouest. L'histoire de l'Union monétaire ouest africaine, v. 1 (Des origines à 1958), v. 2 (De 1958 à 1977), v. 3 (Bilan et perspectives). Paris: Georges Israël Éditeur. English translation History of the West African Monetary Union, v. 1 (From the Origins to 1958), v. 2 (1958-1977), v. 3 (Assessments and Prospects). Paris: Georges Israël, 2002.
BCEAO. 2004. Banque Centrale des États de l'Afrique de l'Ouest. "Chronologie des évènements marquants de l'histoire de la BCEAO et de l'UMOA," édition du 30 juin 2004 révisée, at <http://www.bceao.int> (viewed 20 December 2005).
Braga Paixão, Vítor Manuel. 1964. Cem anos do Banco Nacional Ultramarino na vida portuguesa, 4 v. Lisbon: Banco Nacional Ultramarino.)
Doré, Ansoumane. 1986. Économie et société en République de Guinée 1958-1984, et perspectives… Chenove, France: Éditions Bayardère. (The book is about Guinea, but contains some information on neighboring Equatorial Guinea.)
IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.)
Lobban, Jr., Richard Andrew, and Peter Karibe Mendy. 1997. Historical Dictionary of the Republic of Guines-Bissau, 3rd edition. Lanham, Maryland: Scarecrow Press.
World Currency Yearbook. 1984-1990/93. Brooklyn, New York: International Currency Analysis. Previously called Pick's Currency Yearbook (1955-1979) and Pick's World Currency Report (1980-84). New York: Pick Publishing Corporation.
Monetary authorities: Guinea-Bissau
| Dates | Type | Name | Source | Remarks |
| 1902
-12 September 1974 |
private monopoly issue (as part of a currency union from 1953) | Banco Nacional Ultramarino (headquarters Lisbon, Portugal) | Portugal, law of 16 May 1864 chartering Banco Nacional Ultramarino, reprinted in Banco Nacional Ultramarino (1977: 20-2) | The Banco Nacional Ultramarino received permission to operate in Portuguese colonies (except, initially, Macau and East Timor). The bank had separately marked note issues for each colony. Guinea-Bissau was administratively part of Cape Verde until 1879. The Banco Nacional Ultramarino established a branch in Bissau in 1902. It was the first commercial bank, and the only one to have an office in Guinea-Bissau in this period, although savings banks were also established (BCEAO 2000, v. 2: 556). The first coins were issued in 1933. |
| 13 September 1974
- 27 February 1975 |
de facto central bank (with commercial banking functions) | Banco Nacional Ultramarino (headquarters Lisbon, Portugal) | Portugal, Decree-Law 451/74, 13 September 1974 | The Portuguese government nationalized Portuguese-owned banks in Portugal and Portuguese colonies after a coup by democratic-minded left-wing military officers in Lisbon on 25 April 1974. |
| 28 February 1975
-second half of 1990 |
central bank (with commercial banking functions) | Banco Nacional da Guiné-Bissau (headquarters Bissau, Guinea-Bissau) | Lobban and Mendy (1997: 82); BCEAO (2000, v. 2: 556) | Soon after Guinea-Bissau's independence was recognized, its government took over the local operations of the Banco Nacional Ultramarino. Guinea-Bissau joined the IMF on 24 March 1977. There was no other bank, so the system perhaps came close to a monobank until around 1986, when the government moved away from socialist economic policies. Apparently the central bank had responsibility for coins as well as notes. |
| second half of 1990
-1 May 1997 |
central bank | Banco Central da Guiné-Bissau (headquarters Bissau, Guinea-Bissau) | Guinea-Bissau, Decree No. 32/89, 1989, cited in BCEAO (2000, v. 2: 557); government announcement of 19 July 1990 | The commercial banking operations of the Banco Nacional da Guiné-Bissau were spun off to become the Banco de Crédito Nacional (headquarters Bissau, Guinea-Bissau); that bank was liquidated in 1990. In March 1990, the Banco Internacional da Guiné-Bissau (headquarters Bissau, Guinea-Bissau), with minority government ownership, opened in Bissau. The Banco Totta e Açores (headquarters Lisbon, Portugal) opened in Bissau in March 1992, marking the first time Guinea-Bissau had two banks competing (BCEAO 2000, v. 2: 557). |
| 2 May 1997
-present (2005) |
joint central bank (as part of a currency union) | Banque Centrale des États de l'Afrique de l'Ouest (BCEAO) (headquarters Dakar, Senegal) | Union Monétaire Ouest Africaine, agreement of heads of state, Ouagadougou, 10 May 1996; Guinea-Bissau, consent by legislature to agreement, November 1996; both cited in BCEAO (2000, v. 2: 559) | Guinea-Bissau joined the Banque Centrale des États de l'Afrique de l'Ouest (BCEAO) to improve its monetary stability. The BCEAO issues coins as well as notes. Notes for different member countries were issued with different serial number codes to provide a basis for calculating each country's share of seigniorage. |
Exchange rate arrangements: Guinea-Bissau
| Dates | Official arrangement | Source | Unofficial arrangement, if different | Remarks |
| 1588
-1853 |
fixed; used Portugese and other coins; local ratings | general histories | Portuguese colonization of Guinea-Bissau began in 1588. Guinea-Bissau was administratively part of Cape Verde until 1879. | |
| 1853
-1902 |
fixed; used Portuguese real | Portugal, decree of 19 October 1853, cited in Braga Paixão (1964: [volume and page to come]) | The decree introduced Portuguese currency ratings. Foreign coins continued to circulate until a Portuguese decree of 1886 outlawed them (cited in Braga Paixão (1964: [volume and page to come]). "Real" is Portuguese for "royal." The milreis (meaning "1,000 reals") and conto (1 million reals) were widely used units of account, especially toward the end of this period. In Portugal, the milreis became the main unit of account by Portugal, edict of 24 April 1835. Portugal and Portuguese colonies using its units of account became decimalized. | |
| 1902
-31 December 1913 |
pegged; 1 local real = 1 Portuguese real | Braga Paixão (1964: [volume and page to come]) | The Banco Nacional Ultramarino established a local branch with a separately marked note issue. The exchange rate accordingly changed from fixed to pegged. | |
| 1 January 1914
-27 February 1975 |
pegged; 1 local escudo = 1 Portuguese escudo | Portugal, decree of 22 May 1911; decree of 28 October 1911; Decree No. 141, 18 September 1913 | Portugal changed the name of its currency to the escudo on 22 May 1911; 1 escudo = 1,000 reals (in Portuguese, reis), or 1 milreis. Accounting in the new unit did not actually begin overseas until 1 January 1914. The change of the currency's name from real (meaning royal) to escudo (meaning shield) reflected the revolution that overthrew Portugal's monarchy in 1910. The conto, formerly 1 million reals, now became 1,000 escudos. | |
| 28 February 1975
-27 February 1976 |
pegged; 1 Guinea-Bissau escudo = 1 Portuguese escudo | Lobban and Mendy (1997: 82); BCEAO (2000, v. 2: 556) | The transfer of the note-issuing bank to local control meant the Guinea-Bissau escudo was in practice a separate currency. | |
| 28 February 1976
-27 February 1977 |
pegged; 0.85 Guinea-Bissau peso = 1 Portuguese escudo | BCEAO (2000, v. 2: 556); World Currency Yearbook (1986-1987: 92) | RR: Peg to Portuguese escudo. | Introduced a new currency. Guinea-Bissau never registered a gold parity with the IMF, since it joined almost a year after IMF members abolished the system of gold parities by agreement. Peso is Portuguese for "weight." |
| 28 February 1977
-25 May 1978 |
pegged; 0.74 Guinea-Bissau peso = 1 Portuguese escudo | IMF ARER (1978: 186) | Did not devalue with Portugal. The cross rate with the US dollar remained approximately 34 Guinea-Bissau pesos = US$1. World Currency Yearbook (1986-1987: 92) mentions multiple exchange rates resulting from export taxes of 3-15%, but IMF ARER does not mention them. | |
| 26 May 1978
-22 December 1983 |
pegged to rigid basket; 44 Guinea-Bissau pesos = 1 SDR | IMF ARER (1979: 189) | The cross rate with the Portuguese escudo was about 1 Guinea-Bissau peso = 1.10 Portuguese escudos. | |
| 23 December 1983
-1984 |
crawling peg to SDR | Guinea-Bissau, Decree No. 33/83, cited in IMF ARER (1984: 229) | Devalued to 88 Guinea-Bissau pesos = 1 SDR and announced that the central bank would adjust the exchange rate at monthly intervals. IMF ARER (1984: 228, 551) calls the exchange rate "flexible" in the main text but describes it as pegged to the SDR in the appendix. | |
| 1984
-13 January 1991 |
managed float | IMF ARER (1985: 238, 553) | World Currency Yearbook (1986-1987: 93) notes a black-market premium of about 33%. | The IMF describes the exchange rate as a managed float henceforth. Intially the currency was managed with reference to the SDR, though the US dollar was the intervention currency. On 4 May 1987 the central bank devalued the exchang rate from 263 to 650 Guinea-Bissau pesos = US$1 as the start for a round of managed floating. The purpose of the devaluation was to eliminate the gap between the official and parallel markets (IMF ARER (1988: 237). |
| 14 January 1991
-30 November 1992 |
managed float, dual rate | Guinea-Bissau and Portugal, monetary cooperation agreement, 5 March 1989; IMF ARER (1992: 197-8) | In practice, the official rate operated as a crawling peg with the Portuguese escudo. The second rate was a floating "free" rate. | A monetary agreement with Portugal entered into force. To reduce the gap between the official and "free" rates, the central bank devalued the currency 6.7% on 5 September 1991 and 12% on 30 September 1991 (IMF ARER 1992: 199). The central bank maintained different rates for large- and small-denomination notes, but I do not qualify this as a multiple exchange rate practice. The central bank unified these rates on 4 November 1992. |
| 1 December 1992
-December 1996 |
crawling peg to US dollar, dual rate (IMF: managed float) | IMF ARER (1993: 211-12) | Unofficial flexible
"free" market; see
Remarks.
RR: Parallel market / dual market from January 1993. |
The central bank switched to the US dollar as the anchor currency and reduced its dealing spread from 7.5% to 5%. The central bank adjusted the official exchange rate to keep the spread betwen the official and "free" rates no wider than 5%. Apparently, sometime in 1993 the central bank reduced the spread to 3.5%. On 29 December 1993 it reduced the spread to 2% and likewise reduced the difference between the official and free market exchange rates from 3.5% to 2% (IMF ARER 1994: 208). |
| December 1996
-12 March 1997 |
pegged; 225 Guinea-Bissau escudos = 1 Portuguese escudo | BCEAO (2000, v. 2: 556) | Unofficial flexible
"free" market
apparently continued.
RR: Parallel market / dual market. |
Although not mentioned in IMF ARER, this brief period of exchange-rate constancy is implied by the IMF's International Financial Statistics (August 1997: 333, 571), which implies a stable market rate of nearly 220 Guinea-Bissau escudos = 1 Portuguese escudo while both currencies fluctuated against the US dollar. |
| 13 March 1997
-1 May 1997 |
pegged; 65 Guinea-Bissau pesos = 1 (West African) CFA franc | BCEAO (2000, v. 2: 556, 559) | RR: Parallel market / dual market. | Pegged to the CFA franc and in effect unified the exchange rate, using the rate prevailing on 31 December 1996. The peg was in preparation for joining the Banque Centrale des États de l'Afrique de l'Ouest (BCEAO). |
| 2 May 1997
-31 December 1998 |
pegged; 100 (West African) CFA francs = 1 French franc | Agreement of heads of state of Union monétaire ouest Africaine, Ouagadougou, 10 May 1996; Guinea-Bissau legislature consented in November 1996; both cited in BCEAO (2000, v. 2: 559) | The CFA franc replaced the Guinea-Bissau peso at 1 CFA franc = 65 Guinea-Bissau pesos (versus a rate of 1 CFA franc = 0.12 Guinea-Bissau pesos when the peso was introduced in 1976). The conversion period lasted through 31 July 1997 (IMF ARER 1998: 394). | |
| 1 January 1999
-present (2005) |
pegged; 655.957 (West African) CFA francs = 1 European euro | Conseil des Ministres de l'Union Monétaire Ouest Africaine, decision of 21 December 1998 | The French franc ended its existence as a separate currency, replaced by the European euro. The CFA franc switched to the European euro as its anchor currency, at the prevailing cross rate with the French franc. |