Interview
by Dennis Jones, IMF Resident Representative
Republic of Guinea

Published in La Lance
April 28, 2004

Français

What is the IMF ?

It is an international organization, with 184 member countries. The IMF is above all in charge of the surveillance of the international financial markets and of good economic policies in its member countries, with the aim of avoiding financial crises. In addition, the IMF can, as needed, support member countries, principally with financial resources (not provided directly to governments or the private sector, but to increase the international reserves of the central bank), with technical assistance (mainly in the area of monetary and fiscal policies), and with our advice.

The IMF is sometimes perceived as an instrument for the service of the rich to impoverish the poor. For many observers, the new poverty reduction strategies contained in the PRSPs, are nothing more that a disguised form of structural adjustment programs.

Among member countries, it is true that the rich countries do not use the IMF's resources very much. But, we support all member countries when there is a need and if we can reach agreement on the elements of an economic program. We have supported developing countries with several types of assistance. Significantly, the PRGF (the Poverty Reduction and Growth Facility) is the channel through which the IMF provides poor countries with loans at low interest rates. The programs supported by the PRGF are in the broad framework of poverty reduction as developed in the PRSPs, which are driven by the poor countries themselves, and benefit also from the HIPC Initiative for debt relief. These programs have supported a large number of countries in Africa, including Guinea, to try to raise their growth rates and to reduce their level of poverty. The PRSPs should be a process for developing countries to manage their development better. It is a framework which requires wide consultation. It is also a framework which allows donors to better target and coordinate their support for the processes which should accelerate the rate of growth. For all HIPC countries it creates a mechanism to target well the resources from debt relief. It is also a process for countries to adapt in their own ways.

The IMF, it seems, does not impose political conditions in order to agree on a program with a country. If this is the case, is it possible to disassociate economic and social conditions ?

As you said, the IMF does not incorporate political conditions as part of the agreement for a program with a member country. Our conditions rest strictly in the economic domain. We have financial criteria (for example, the level of the budget deficit) and structural conditions (such as privatization of certain key enterprises). Regarding the second element of the question, we can certainly distinguish between political and economic conditions.

You are currently on bad terms with Guinea. Is there a suspension of the program or a rupture between the IMF and Conakry ?

Relations between Guinea and the IMF remain warm. You should not forget that Guinea is a member of the IMF, even if we do not disburse funds. Regarding the program, there were slippages, and since end-December 2002 the formal program had been interrupted. Guinea did not meet certain financial criteria and because of that we have suspended our disbursements. We continue to have a close dialogue with the government, especially with the Minister of Finance, and the Governor of the central bank. In particular, we give our advice and follow the evolution of policies, while awaiting a significant improvement in the economic situation.

Can you tell us how much was the loss registered by the Guinean Treasury following the suspension of the program ?

The program approved for Guinea in May 2001 was for SDR (Special Drawing Rights) 64 million, about US$ 95 million or GNF 190 billion. The disbursements were due to be made in 5 equal tranches, every 6 months, on the condition that certain performance criteria were met. At the time of the suspension of the program in December 2002, only 2 disbursements had been made, amounting to SDR 26 million. The remaining SDR 38 million represents a loss with regard to the program itself. However, to this should be added all the assistance in the context of the HIPC Initiative, about US$ 186 million over the period 2003-06, and budgetary aid from which Guinea would have benefited if the program had continued to run properly. We also should not forget that finance from other multilateral and bilateral partners will also be reduced in the absence of a clear indication of a firm and notable commitment to re-establish and to maintain a stable economic environment.

The Guinean Government has always explained the recent financial slippages as due to the security spending. What do you say to that ?

To explain the slippages only in terms of the security spending is too simplistic, given that the performance criteria take account of several factors, such as : the mobilization of fiscal revenue, the execution of budget spending, the level of international reserves of the Central Bank of Guinea, the level of government indebtedness to the central bank, the rate of growth of the money supply, the inflation rate, and the exchange rate, which are all inter-related. Coming back to the security spending, they are the reason given for the growth of the item « subsidy and transfers », which includes "spending to be properly processed", and essentially constitutes spending on security and protection of the country. You should understand that the higher-than-envisaged spending on security worsened the budget deficit and replaced a significant allocation of spending to the priority sectors and investment, which thus reduces the prospects for durable economic growth and the ability to attain the objectives of poverty reduction.

The nomination of a government last March has raised hope in certain quarters regarding the prospects of an imminent return toward a program. Despite everything, is it possible to dream that this is possible ?

It is not necessary to dream. The new government has begun with signs of great commitment which give hope that there will be significant changes in the economic area. The Prime Minister and the Minister of Finance have announced a range of measures, which, if well applied, should improve the fiscal situation, in terms of a reduction of the deficit and the need for monetary financing. It is important to improve both sides of the public finances—receipts and spending. It is too early at this stage to see many major changes, but I await the information for March and the following months, which should reflect the impact of these measures.

When you met the new Prime Minister and Finance Minister recently, what had been the main topic ? Did you discuss the conditions for a resumption of a program ?

There are essentially three conditions for a resumption of a program. First, to reduce the overall fiscal deficit, to restrain non-priority spending, and to integrate defense and security spending fully in the program and in the proper budgetary process ; second, monetary policy needs to be tightened and the exchange rate liberalized ; and third, non-mining revenues need to grow. The Prime Minister and Finance Minister have called meetings with myself and the World Bank representative to explain the measures adopted recently. They indicated that there is a change of behavior in government affairs, with a conviction to put in place the measures and to follow their progress scrupulously. They also stated that the economic problems were for the whole government to share. The two Ministers also gave a summary report of the initial work undertaken to contain spending and raise revenues.

When is the next joint IMF-World Bank mission due in Guinea ?

We are in discussion with the Minister of Finance regarding the next joint IMF-World Bank mission to Guinea. We are awaiting his reply, but we have proposed a mission for May.