Historical Sketch

The Portuguese navigator Nuno Tristão discovered the coastal areas for the Europeans in 1446 by. In the 16th century the first settlements were founded which were administered out of the Cape Verde islands. Only in the late 19th century, the mainland part was split off and became a colony of its own. In 1951, the Portuguese colonies were transformed into overseas provinces. About the same time, the war of liberation began, which again saw some cooperation between the insular and mainland colonies. After the Portuguese Revolution of 1974, both colonies attained independence, Guinea in 1974 and Cape Verde In 1975.

Monetary History Overview

Already before the administrative separation from Cape Verde in 1879, the Portuguese National Overseas Bank had already opened a Cape Verdean branch in 1865 and was supplying money also to the mainland territory. In 1902, a separate subsidiary was founded in Guinea which began issuing banknotes in 1909. In 1903, its banknotes had been declared legal tender. The Guinean Milreis was nominally identical to the Portuguese, however the convertibility of the colonial banknotes was limited. The Portuguese currency reform of 1911 was implemented in Guinea with three years delay. The Guinean Escudo was at par with the metropolitan currency. In 1953, Portugal passed a new constitution for its overseas territories which prescribed the unification of the colonial currencies (except for India). This had no effect on the Guinean currency, except for an exchange of banknotes and coins after the colony had been renamed an overseas territory. Two years after independence, a state-owned commercial bank began operations in 1976 taking over money issuance from the National Oversees Bank. In 1990, it was then reconstituted as the central bank. Together with the new issuing institution, the currency was reformed. The Guinea-Bissau Peso replaced the Escudo at par and became the national currency. The peg to the Portuguese Escudo remained but was revised in 1977 as Guinea Bissau only partly followed the Portuguese devaluations. A year later, the Peso got repegged to the IMF Special Drawing Right (SDR) unit. Subsequently, the exchange rate remained artificially stabilized until 1983 when the Peso got devalued by 50% and floated afterwards. The value of the currency dived immediately, turning into hyperinflation in the 1990s. For remediation, Guinea-Bissau sought to associate with the West African Monetary Union, which to that time had only included former French colonies. In mid-1996, the negotiations were completed, and Guinea Bissau joined in January 1997. In February, the Peso got pegged to the common currency, and in May 1997, the West African CFA Franc replaced the national currency.

Guinea-Bissau joined the International Monetary Fund (IMF) on 24.03.1977.

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