IMF Staff Completes Review Mission to Guinea
An IMF mission led by Abdoul Aziz Wane visited Conakry during December 2-15, 2015, to conduct discussions on the sixth and seventh reviews of the authorities program supported by an arrangement under the Extended Credit Facility (ECF).The IMF Executive Board approved the arrangement for Guinea on February 24, 2012 for SDR 128.52 million, about US$ 200 million (seePress Release No. 12/57).
At the conclusion of the mission Mr. Wane issued the following statement:
“The Guinean authorities and IMF staff have reached understandings ad referendum on a set of policies that, subject to approval by IMF management and the Executive Board, could be supported by the seventh disbursement under the ECF arrangement of SDR 18.36 million (about US$25.6 million). Subject to measures to be adopted in the coming weeks, the Executive Board meeting is expected in mid-March 2015.
“Guinea has been hit by two major adverse shocks, which have exacted a heavy toll on its economy and living conditions. First, since early 2014, Guinea has been battling the Ebola epidemic, which has claimed thousands of lives and severely disrupted economic activity. Second, Guinea has been affected by the decline in commodity prices, which led to a decline in gold production and exports, foreign exchange earnings and government revenue. Beyond the impact of these shocks, policy slippages have increased macroeconomic tensions. The fiscal deficit increased, without adequate financing being secured, as the authorities sought to implement a large public investment program in roads, electricity and water. The sustained increase in spending has resulted in extensive loss of international reserves and an increase in the premium between the official and bureau exchange rates. Most performance criteria and indicative targets under the ECF arrangement in 2015 were not met. Against the backdrop of weak economic growth and low fuel prices, inflation has remained subdued at some 7.5 percent at end-November 2015.
“Economic prospects have improved with the nearing end of the Ebola epidemic and the peaceful presidential elections. Growth is projected to rebound to close to 4 percent, reflecting continued strong production in the agriculture, bauxite and electricity sectors.
“The authorities intend to tighten policies in 2016 to reduce the prevailing macroeconomic imbalances, while protecting resources devoted for poverty reduction. The fiscal deficit will be limited to what can be financed through secured external budget support and project loans and limited recourse to domestic financing, avoiding the incurrence of any new arrears. The planned recapitalization of the central bank of the Republic of Guinea (BCRG) and the reimbursement by the treasury of the central bank advances will strengthen its ability to conduct monetary policy. The mission encourages the authorities to enhance the transparency of the public investment program. It welcomed the central bank's intention to ban guarantees to private entities, which will boost its credibility and ingrain confidence in the Guinean franc.
“The IMF team thanks the authorities for their hospitality and for the constructive discussions.”
The mission met with President of the Republic Alpha Condé, state minister for finance Mohamed Diaré, central bank governor Lounceny Nabé, planning minister Sékou Traoré, deputy budget minister Ansoumane Condé, and other senior government officials, the banking association, international partners, as well as civil society. The discussions focused on recent economic developments and prospects, and policy implementation.
The ECF is the IMF's main tool for medium-term financial support to low-income countries. Financing under the ECF currently carries a zero percent interest rate, with a grace period of 5½ years, and a maturity of 10years.