Title: Private investment in Guinea-Bissau: main determinants and key reforms

Authors: Cheikh Ahmed T. Sall

Addresses: Central Bank of West African States (BCEAO), Avenida Combatentes da Liberdade da Pátria, BP 38, Bissau, Guiné-Bissau

Abstract: There is a dearth of knowledge on the determinants of private investments in Guinea-Bissau. This paper aims to fill this gap, using the autoregressive distributed lag (ARDL) approach, in order to identify short-term and long-term determinants. Our results reveal an increasing importance of international drivers, in particular remittances and foreign direct investment. Demand, proxied by real GDP, is significant only in the short term and, socio-political instability negatively affects private investment. These results confirm the need to accelerate reforms aimed at improving the business environment and promoting the diversification of the financial sector. Indeed, domestic credit to the private sector generally stimulates private investment, but its impact does not appear to be significant in Guinea-Bissau according to our estimation results. Therefore, it may be useful to put in place more suitable financing structures, in particular a viable micro-credit infrastructure, and sectoral banks for agriculture, housing and investment.

Keywords: private investment determinants; low-income country; model ARDL; break tests; Guinea-Bissau.

DOI: 10.1504/AJESD.2025.145452

African Journal of Economic and Sustainable Development, 2025 Vol.10 No.2, pp.111 - 131

Accepted: 01 Jun 2024
Published online: 01 Apr 2025 *

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