## Guinea: Staff Report Excerpts (1ginea2020005)

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### Executive summary — context and pandemic response
- Real growth expected to reach 5.2 percent in 2020, with the mining sector resilient.
- Presidential elections held October 18; results validated November 7; unrest followed elections but situation calm thereafter.
- 2017-20 ECF arrangement provided policy anchor; fourth ECF review completed April 1, 2020; fifth review postponed due to pandemic; emergency financing under the RCF approved in June 2020 (50 percent of quota, 1 percent of GDP).
- Authorities’ COVID-19 Response Plan worth 1.8 percent of GDP to strengthen health infrastructure, protect vulnerable groups, and support the private sector.
- COVID-19 cases exceeded 12,000 at end-October; central bank (BCRG) lowered policy rate and reserve requirements and introduced regulatory relief.

### Recent economic developments and outlook
- Non-mining activity hit by COVID-19; retail trade, transport, and tourism adversely affected; agriculture resilient but faced logistics disruptions.
- Mining activity strong: bauxite production boosted by early start of new producers and higher China demand; artisanal gold buoyant.
- Inflation dynamics:
  - Headline inflation peaked at 11.6 percent in April; moderated to 10.6 percent at end-September.
  - Transportation inflation spiked at 27.6 percent (y-o-y) in April.
  - Food inflation at 13.4 percent (y-o-y) in April; core inflation (excluding energy and transportation) 3.1 percent at end-September.
- External sector and reserves:
  - 2020 current account deficit projected at 12.3 percent of GDP (against 13.7 percent in 2019 and a pre-crisis projection of 21.9 percent).
  - Gross international reserves $1.3 billion at end-September (3.6 months of import coverage).
  - Real effective exchange rate continued appreciating; estimated overvalued by between 13 and 28 percent at end-2017.
- Banking sector and liquidity:
  - Excess reserves in local currency increased by 51 percent (average, y-o-y) at end-September.
  - Deposit growth 21 percent (y-o-y); private sector credit grew 17 percent (average, y-o-y) at end-September.
- Growth and inflation projections:
  - Growth projected at 5.2 percent in 2020; non-mining sector expected to grow at 2.4 percent in 2020.
  - Growth projected at 5½ percent in 2021 and 5¼ percent in 2022.
  - Headline inflation expected to reach 10.2 percent (average, y-o-y) in 2020 and return to 8 percent in 2021.

### Program performance, targets, and corrective actions
- End-December 2019: all ITs and all but one PCs met; PC on the basic fiscal balance missed by 0.04 percent of GDP.
- June 2020 misses due to COVID-19 on:
  - PCs on net domestic assets,
  - net government borrowing from the central bank,
  - tax revenue IT (tax revenues declined by 0.9 percent of GDP at end-June y-o-y).
- End-September preliminary misses: large misses on central bank net domestic assets and government budgetary borrowing reflecting central bank financing; net international reserves IT missed despite external disbursements.
- Authorities’ corrective measures:
  - Contain non-priority spending; mobilize external resources; repay central bank advances by end-December; active liquidity management to contain monetary base growth.
  - Submitted 2020 supplementary budget to Parliament and expected to submit 2021 budget before Board meeting (prior actions).
- Staff supports waivers of nonobservance given corrective actions; request would result in disbursement of SDR 34.426 million and catalyze donor support.

### Fiscal stance, COVID-19 response, and medium-term path
- 2020 fiscal relaxation: basic fiscal balance relaxed by close to 3 percentage points of GDP (from projected 0.6 percent surplus at 4th review to projected -2.3 percent).
- Widening reflects:
  - Additional crisis spending and revenue measures worth 1.8 percent of GDP.
  - Revenue shortfall of 1.2 percent of GDP from weaker growth and constrained tax collection.
- Shifts in expenditure:
  - Domestically-financed capital investment reduced by ½ ppt of GDP vs pre-COVID projections.
  - Externally-financed capital investment reduced by 1½ ppt of GDP vs pre-COVID projections.
- Selected 2020 fiscal stance (percent of GDP):
  - Revenues and grants: 4th review 15.2; RCF 13.7; Current 14.7.
  - Revenues: 4th review 14.1; RCF 12.3; Current 12.7; of which covid-response: 0.2 (4th review), 0.0 (RCF), 0.24 (Current).
  - Expenditures & net lending: 4th review 18.2; RCF 17.3; Current 18.3.
  - Current expenditure: 4th review 11.3; RCF 12.4; Current 13.5; of which covid-response: 0.7 (4th), 2.0 (RCF), 0.93 (Current).
  - Capital expenditure: 4th review 6.8; RCF 4.9; Current 4.7; of which covid-response: 0.5 (4th), 0.5 (RCF), 0.54 (Current).
  - Total Covid measures: 4th review 1.5; RCF 1.8.
  - Overall balance: 4th review -3.0; RCF -3.7; Current -3.6.
  - Basic balance: 4th review 0.6; RCF -2.0; Current -2.3.
- Medium-term fiscal strategy (2021):
  - Target basic balance 0.5 percent; target overall balance about -2.4 percent of GDP implying consolidation of 1.2 percent of GDP.
  - Authorities committed to reducing and rephasing externally financed investment plans in 2021 and medium term.

### Revenue mobilization and mining sector considerations
- Despite projected mining output doubling growth, mining tax revenue projected to increase by only 0.1 ppt of GDP vs pre-crisis projections due to exonerations and exemptions for new companies.
- Policy priorities:
  - Minimize exonerations, exemptions, and grandfathering in new mining contracts; apply tax provisions of the 2013 Mining Code.
  - Explore mobilizing revenues from artisanal gold production.
  - Continue revising the General Tax Code with IMF support.
  - Minimize profit shifting from transfer pricing (Annex 2).
  - Continue investing in digitalization, business continuity, and risk-based compliance management.
- Annex II mining facts:
  - Real mining GDP projected to expand by 18 percent y-o-y by end-2020.
  - Bauxite production increased by 21 percent (y-o-y) at end-September 2020; two new companies (GAC and Chalco) added about 7 million tons (11 percent of 2019 production) by end-September 2020.
  - Alumina production increased by 42 percent y-o-y at end-September 2020.
  - Artisanal gold exports recorded 54 tons at end-August 2020; 2019 official artisanal gold exports 14 tons.
  - Despite production (+18 percent) and exports (+25 percent) increases in 2020, mining revenues projected to decline by 9.4 percent.

### Monetary policy, exchange rate, and central bank actions
- Monetary easing measures:
  - Policy rate lowered in April from 12.5 to 11 percent; later references include policy rate lowered to 11.5 percent.
  - Reserve requirement ratio reduced by 100 basis points to 15 percent.
  - Reserve money growth 40 percent (y-o-y) at end-September; program projection around 16 percent. Monetary base needs reduction of about 1.8 percent of GDP.
  - BCRG committed to issuing sterilization instruments (Titres de Régulation Monétaire) to contain reserve money growth; TRM issuance GNF 808 billion in July 2020.
- FX policy and reserves:
  - Rule-based FX intervention policy adopted November 2020 (prior action): do not purchase (sell) FX unless rate has appreciated (depreciated) by more than 0.25 percent vs 5-day moving average; intervention amount capped at US$8 million per intervention.
  - Electronic trading platform installed; rule public and replicable.
  - Gross international reserves increased from US$686 million at end-2017 to US$1,245 million projected at end-2020; targeted import coverage around 3.8 months by end-2020.
  - Safeguards assessment initiated in context of RCF; outstanding issues include finalizing external audit of FX reserves at end-June 2020 and strengthening internal audit and Audit Committee oversight.
- Operational and governance enhancements:
  - Monetary Policy Committee operational since October 2020.
  - BCRG law revision initiated, expected to be completed by April 2021.

### Debt sustainability and financing
- Debt position and projections (select figures):
  - Gross public debt: 2019 36.5; 2020 40.4; 2021 43.2; 2022 43.5; 2023 42.3; 2024 41.2; 2025 40.4.
  - Current account balance (including official transfers): 2019 -13.7; 2020 -12.3; 2021 -14.2; 2022 -12.1.
- DSA (December 2020): Guinea remains at moderate risk of external debt distress; overall risk of debt distress moderate with limited space to absorb shocks.
- DSA assumptions and risks:
  - Baseline assumes new external borrowing 6.4 percent of GDP in 2020 and average 6.1 percent of GDP over 2021–22.
  - Average grant element of new borrowing about 33.1 percent in 2020, rising to about 41 percent in 2024.
  - Souapiti dam loan included in DSA though SPV arrangement described; grant element estimated 29 percent.
- Capacity to repay IMF (as of November 6, 2020):
  - Outstanding obligations to the Fund stand at SDR 327 million (about 3 percent of GDP).
  - Fund obligations based on existing credit (Principal, millions of SDRs): example 2022: 38.3; 2023: 34.4; 2024: 37.6; 2025: 38.1.
  - Outstanding credit based on existing and prospective drawings (millions of SDRs): 2020: 361.4; 2021: 341.3; 2022: 303.1; 2023: 268.8.
- Staff recommendation:
  - Support completion of the fifth and sixth (final) reviews under the ECF, waivers for nonobservance, and completion of financing assurances review.

### Transparency, procurement, and public financial management
- COVID-19 spending reports through October 2020 published on Ministry of Finance website; dedicated TSA account established to receive/disburse COVID funds.
- Budgetary fund created to earmark resources for pandemic; decree in July authorized additional budgetary resources and expenditures; plan to regularize COVID-19-related expenditures executed before decree and discontinue exceptional procedures.
- Procurement contracts for COVID-19 projects being published; Inspectorate General for Finance verifying high-risk expenditures with civil society involvement.
- Public investment management and PFM reforms:
  - TSA expanded to cover 89 percent of public accounts.
  - New procurement code in force since September 1, 2020.
  - Electronic platform for integrated investment management launched; PIM manual expected by December 2020.
  - Migration to GFS 2014 planned with IMF TA; further work needed on financial reporting, cash, and debt management.
  - Court of Audit expected to finalize ex post audit of COVID spending in June 2021.

### Social safety nets, inclusion, and poverty impact
- Poverty: 2018 survey showed nearly 45 percent of population below national poverty line; multidimensional poverty declined from 36.3 percent in 2012 to nearly 31 percent in 2018-19.
- Cash and food transfer plans:
  - Aim to provide digital cash transfers to 240,000 households; World Bank financing covers 150,000 households.
  - ANIES provided digital transfers to 17,000 Conakry households; 7,000 Conakry households to receive food transfers with WFP help.
  - By September only one-tenth of intended recipients had received transfers.
- Social spending execution through September: authorities executed about 70 percent of planned expenditure; most health spending materialized; social and private sector support execution fell short.

### Structural reforms, governance, and AML/CFT
- Anti-corruption measures:
  - Implementing decree of asset declaration regime adopted March 2020; asset declaration form finalized and published with World Bank TA; first submissions expected in early 2021.
  - Draft AML/CFT law finalized April 2020 with IMF TA; expected to be adopted by Council of Ministers in November.
  - Authorities allocated resources in draft 2021 budget for Court of Audit institutional structure.
- Structural benchmarks status:
  - Most SBs missed due to pandemic (electricity tariff increase planned June 2020 not implemented); continuous SB on new or renewed mining agreements met.
  - Prior actions met: submission to Parliament of 2020 supplementary budget; implementation of rules-based FX intervention; publication of asset declaration form; submission of 2021 budget.
- Governance improvements and program conditions emphasized to preserve program credibility.

### Risks, contingency, and staff appraisal
- Risk matrix highlights:
  - High likelihood/high impact: unexpected shift in COVID-19 pandemic; political/social instability around elections.
  - Medium likelihood/impact: oil market oversupply/volatility.
- Policy responses recommended:
  - Create fiscal space to scale-up health spending and targeted mitigation measures.
  - Intensify structural reform to remove growth bottlenecks; prioritize transparency in COVID-19 response implementation.
- Staff appraisal:
  - Growth buttressed by mining sector but non-mining substantially affected; real growth 5.2 percent in 2020 with non-mining at 2.4 percent.
  - Mining production increase has not translated into higher fiscal revenue or reserve accumulation.
  - Reimbursement of central bank advances is critical to maintain moderate inflation.
  - Exchange rate flexibility and rule-based FX intervention welcomed to preserve external buffers.

*International Monetary Fund — 1ginea2020005 (staff report excerpts).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- Real growth is expected to reach 5.2 percent in 2020 as the severe impact of the pandemic in the country was partially mitigated by a resilient mining sector.
- Presidential elections were held on October 18, giving President Condé an outright victory. Such results were contested by the opposition and followed by violent demonstrations and unrest.
- Since the Constitutional Court validated the electoral results on November 7, the situation has remained calm.
- The 2017-20 Extended Credit Facility (ECF) arrangement has provided Guinea with an important policy anchor.
- Growth averaged over 5 percent and inflation below 10 percent over the program period, and the incidence of multidimensional poverty declined from 36.3 percent in 2012 to nearly 31 percent in 2018-19.
- The fourth ECF review was completed by the IMF Executive Board on April 1, 2020. The fifth review was postponed due to the pandemic, and emergency financing under the Rapid Credit Facility (RCF) was approved in June 2020 (50 percent of quota, 1 percent of GDP).
- To contain the pandemic, the authorities are implementing a comprehensive Response Plan (Annex 1). The Response Plan, worth 1.8 percent of GDP, aims at strengthening infrastructure in the health sector, protecting the most vulnerable, and supporting the private sector, with international financial support.
- Since March 2020, the outbreak spread throughout the country, with cases exceeding 12,000 at end-October.
- The central bank (BCRG) lowered its policy rate, reduced reserve requirements, and introduced other regulatory measures to support the financial sector.

### Recent economic developments and outlook
- Non-mining economic activity has been hit by the COVID-19 pandemic, adversely impacting retail trade, transport, and tourism; agricultural sector showed resilience but faced transport and logistics disruptions.
- Mining activity was resilient: bauxite production was boosted by earlier-than-expected start of production by new companies and faster recovery in demand from China; artisanal gold mining activity was buoyant.
- Inflation dynamics:
  - Headline inflation peaked at 11.6 percent in April.
  - Transportation inflation spiked at 27.6 percent (y-o-y) and food inflation at 13.4 percent (y-o-y) in April.
  - Inflation moderated to 10.6 percent at end-September.
  - Core inflation (excluding energy and transportation prices) was 3.1 percent at end-September.
- External sector and reserves:
  - The 2020 current account deficit is projected at 12.3 percent of GDP (against 13.7 percent in 2019 and a pre-crisis projection of 21.9 percent).
  - Gross international reserves remained at $1.3 billion at end-September (3.6 months of import coverage).
  - The real effective exchange rate has continued appreciating due to inflation differentials vis-a-vis trading partners and was estimated to be overvalued by between 13 and 28 percent at end-2017.
- Banking sector:
  - Excess reserves in local currency increased by 51 percent (average, y-o-y) at end-September.
  - Strong deposit growth of 21 percent (y-o-y) supported liquidity.
  - Private sector credit grew by 17 percent (average, y-o-y) at end-September.
- Growth projections and inflation:
  - Growth is projected at 5.2 percent in 2020, thanks to a resilient mining sector.
  - Non-mining sector expected to grow at 2.4 percent in 2020.
  - Growth projected at 5½ percent in 2021 and 5¼ percent in 2022, supported by production ramp-up of bauxite and iron ore.
  - Headline inflation expected to reach 10.2 percent (average, y-o-y) in 2020 and return to 8 percent in 2021.

### Program performance
- Program performance was satisfactory for end-December 2019, with all ITs and all but one PCs met.
- The PC on the basic fiscal balance was missed by a minor amount.
- In June 2020 the impact of the COVID-19 pandemic and ensuing policy response led to misses on:
  - PCs on net domestic assets,
  - net government borrowing from the central bank, and
  - the tax revenue IT.
- The authorities have requested waivers on the basis that underperformance is being met with corrective actions to:
  - contain non-priority spending,
  - mobilize external resources,
  - repay the central bank advances to bring net credit to government to the statutory limits by end-December, and
  - use active liquidity management to contain the growth of the monetary base.
- The authorities have submitted to Parliament a 2020 supplementary budget and are expected to submit a 2021 budget before the Board meeting in line with program objectives (prior actions).

### Policy recommendations
- The authorities have implemented a response plan to increase health spending, support the most vulnerable and protect the private sector.
- To buttress debt sustainability and create fiscal space to support the post-pandemic recovery and strengthen social safety nets, the staff recommends:
  - Reducing and rephasing non-priority spending.
  - Mobilizing additional tax revenues, including from the mining sector.
  - As the pandemic subsides, implementing programmed tax revenue measures.
  - Advancing the electricity tariff reform.
  - Prudent public investment planning and management.
- Monetary and external policy recommendations:
  - Commitment to the recently-adopted rule-based FX intervention policy (prior action) to allow greater exchange rate flexibility and help preserve external buffers.
  - Reimbursement of central bank lending to the government to be essential in keeping inflation at moderate levels.
- Governance and financial sector:
  - Strengthening the anti-corruption framework.
  - Promoting access to credit to foster governance and private sector development.

### Staff views and program modality recommendation
- In view of the satisfactory program performance and supplementary actions, staff supports the authorities’ request for:
  - completion of the fifth and sixth (and last) reviews under the ECF arrangement, and
  - waivers of nonobservance.
- This would result in the disbursement of SDR 34.426 million and catalyze donor support.

*November 23, 2020 — International Monetary Fund.*

### 11.      Program performance at end-December 2019 was satisfactory, while deviations in

### Program performance at end-December 2019 was satisfactory, while deviations in 2020 reflect the impact and the authorities’ appropriate response to the COVID-19 pandemic

### Program performance and targets
- All end-December indicative targets (IT) and all but one quantitative performance criteria (PCs) were met.
- The PC on the basic fiscal balance was narrowly missed: 0.04 percent of GDP.
- Two end-June 2020 PCs and one IT, set ahead of the COVID-19 pandemic, were missed:
  - Tax revenues declined by 0.9 percent of GDP at end-June y-o-y, contributing to a miss in the tax revenue IT.
  - PCs on net domestic assets and net government borrowing from the central bank were missed due to resorting to central bank financing.
- Preliminary data indicate most end-September ITs were missed:
  - Large misses on ITs for net domestic assets of the central bank and government budgetary borrowing reflecting continued central bank financing.
  - IT on net international reserves missed despite some external financing disbursements.
  - Targets on basic balance and tax revenues were also missed.

### Key macroeconomic indicators (selected figures from Text Table 1)
- Real GDP growth:
  - 2017: 10.3
  - 2018: 6.2
  - 2019: 5.6
  - 2020: 5.2
  - 2021: 5.5
  - 2022: 5.2
  - 2023: 5.0
  - 2024: 5.0
  - 2025: 5.0
- Mining growth:
  - 2017: 55.5
  - 2018: 8.7
  - 2019: 8.0
  - 2020: 18.4
  - 2021: 7.6
  - 2022: 6.0
  - 2023: 5.3
  - 2024: 5.1
  - 2025: 5.0
- Non-mining growth:
  - 2017: 4.1
  - 2018: 5.7
  - 2019: 5.1
  - 2020: 2.4
  - 2021: 5.0
  - 2022: 5.0
  - 2023: 4.9
  - 2024: 4.9
  - 2025: 4.9
- Inflation (average):
  - 2017: 8.9
  - 2018: 9.8
  - 2019: 9.5
  - 2020: 10.2
  - 2021: 8.0
  - 2022: 7.9
  - 2023: 7.8
  - 2024: 7.8
  - 2025: 7.8
- Central government overall balance, incl. grants:
  - 2017: -2.1
  - 2018: -1.1
  - 2019: -0.5
  - 2020: -3.6
  - 2021: -2.4
  - 2022: -2.2
  - 2023: -2.3
  - 2024: -2.1
  - 2025: -2.2
- Primary basic fiscal balance:
  - 2017: -1.1
  - 2018: -0.3
  - 2019: 0.0
  - 2020: -2.7
  - 2021: -1.5
  - 2022: -1.3
  - 2023: -1.3
  - 2024: -1.1
  - 2025: -1.3
- Current account balance (including official transfers):
  - 2017: -6.7
  - 2018: -20.3
  - 2019: -13.7
  - 2020: -12.3
  - 2021: -14.2
  - 2022: -12.1
  - 2023: -11.1
  - 2024: -9.9
  - 2025: -10.4
- Overall balance:
  - 2017: 0.7
  - 2018: 1.7
  - 2019: 2.2
  - 2020: -1.8
  - 2021: 0.4
  - 2022: 1.3
  - 2023: 1.0
  - 2024: 1.0
  - 2025: 0.5
- Gross public debt:
  - 2017: 39.5
  - 2018: 37.7
  - 2019: 36.5
  - 2020: 40.4
  - 2021: 43.2
  - 2022: 43.5
  - 2023: 42.3
  - 2024: 41.2
  - 2025: 40.4

*Sources: Guinean authorities; and Fund staff estimates and projections.*

### Waivers and corrective actions
- Staff supports waivers for the missed PC given corrective actions:
  - Reached out to development partners to help finance the response plan and reduce central bank advances.
  - Reallocated spending toward health and mitigation measures.
  - Committed to bring back net credit to government from the BCRG to statutory limits by end-December.
  - Submitted to Parliament a 2020 supplementary budget and expected to submit a 2021 budget before the Board meeting.
  - BCRG committed to issuing sterilization instruments to bring reserve money growth rate to about 15 percent by end-December.

### Structural benchmarks and reforms
- The emergency response derailed the structural agenda; most structural benchmarks (SBs) were missed.
  - Electricity tariffs increase planned for June 2020 could not be implemented due to the pandemic.
  - Publication of the asset declaration form was completed with delay in November 2020 (prior action).
  - Finalization of the PIM manual expected for December 2020.
  - Continuous SB on new or renewed mining agreements was met.

### Fiscal policy — responding to the crisis in 2020 (Text Table 2 and related)
- Basic fiscal balance relaxed by close to 3 percentage points of GDP:
  - From a projected 0.6 percent of GDP surplus at the 4th review to a projected -2.3 percent of GDP.
- Widening reflects:
  - Additional crisis spending and revenue measures worth 1.8 percent of GDP.
  - A 1.2 percent of GDP revenue shortfall from weaker growth and constrained tax collection capacity.
- Shifts in expenditure:
  - Reduced domestically-financed capital investment by ½ ppt of GDP compared to pre-COVID projections.
  - Reduced externally-financed capital investment by 1½ ppt of GDP compared to pre-COVID projections.
- Selected 2020 fiscal stance figures (percent of GDP):
  - Revenues and grants:
    - 4th review (Pre-crisis): 15.2
    - RCF: 13.7
    - Current: 14.7
  - Revenues:
    - 4th review: 14.1
    - RCF: 12.3
    - Current: 12.7
    - of which covid-response: 0.2 (4th review), 0.0 (RCF), 0.24 (Current)
  - Expenditures & net lending:
    - 4th review: 18.2
    - RCF: 17.3
    - Current: 18.3
  - Current expenditure:
    - 4th review: 11.3
    - RCF: 12.4
    - Current: 13.5
    - of which covid-response: 0.7 (4th), 2.0 (RCF), 0.93 (Current)
  - Capital expenditure:
    - 4th review: 6.8
    - RCF: 4.9
    - Current: 4.7
    - of which covid-response: 0.5 (4th), 0.5 (RCF), 0.54 (Current)
  - Total Covid measures:
    - 4th review: 1.5
    - RCF: 1.8
  - Overall balance:
    - 4th review: -3.0
    - RCF: -3.7
    - Current: -3.6
  - Basic balance:
    - 4th review: 0.6
    - RCF: -2.0
    - Current: -2.3

### Revenue mobilization and mining sector
- Despite expected doubling in mining output growth, mining tax revenue projected to increase by only 0.1 ppt of GDP compared to pre-crisis projections, because many new companies benefit from exonerations and exemptions.
- The pandemic slowed implementation of revenue measures; the e-tax system has just started functioning.
- Lower international fuel prices supported stronger-than-expected revenues from the special tax on petroleum products.
- Policy priorities to raise revenues:
  - Minimize exonerations, exemptions and grandfathering in new mining contracts; apply tax provisions of the 2013 Mining Code.
  - Explore mobilizing revenues from artisanal gold production.
  - Continue revising the General Tax Code with IMF support.
  - Minimize profit shifting from transfer pricing (Annex 2).
  - Continue investing in digitalization, business continuity planning, and risk-based compliance management.

### Electricity sector and subsidies
- Pandemic measures increased electricity spending:
  - Free electricity to vulnerable households, postponed payments, extended into de facto full waiver.
  - Increased electricity demand compounded by high consumption limits for free access: initially 330 kWh per month; reduced to 250 kWh/month during the last quarter of the year.
  - Delay in Souapiti dam operations forced EDG to use more expensive thermal technology.
- Authorities committed to gradually bringing tariffs to cost-recovery levels while keeping a social tariff, supported by the World Bank.

### External financing and central bank advances
- External support mobilized for COVID response, including IMF RCF, CCRT, and DSSI; projected external support for pandemic response: 2.5 percent of GDP.
- Short-term central bank advances used to pre-finance the immediate response and resulted in elevated net borrowing above statutory limits by about 1.3 percent of GDP at end-September.
- Authorities committed to repay central bank advances by year-end.

### Transparency, accountability, and procurement
- COVID-19 spending reports through October 2020 posted on the Ministry of Finance website.
- Budgetary fund created to earmark external and domestic resources for the pandemic.
- Dedicated TSA account established to receive and disburse COVID-19 funds.
- In July, a decree authorized additional budgetary resources and expenditures; authorities plan to regularize COVID-19-related expenditures executed before the decree and discontinued exceptional procedures.
- Procurement contracts for COVID-19 projects are being published; the Inspectorate General for Finance is verifying high-risk expenditure with civil society involvement.
- Court of Audit expected to finalize ex post audit of COVID spending in June 2021.

### Medium-term fiscal path and debt sustainability
- 2021 fiscal strategy aims to support recovery while ensuring gradual consolidation:
  - Target basic balance of 0.5 percent.
  - Target overall balance of about -2.4 percent of GDP, implying an overall consolidation of 1.2 percent of GDP.
- Expectations:
  - Revenues recover as tax relief measures are phased out and non-mining economy rebounds.
  - Expenditures decline as pandemic relief spending terminates.
  - Electricity sector expenditure reduced to pre-crisis levels as Souapiti dam comes on stream.
- Authorities committed to reducing and rephasing externally financed investment plans in 2021 and the medium term compared to before the crisis.
- DSA (December 2020) result: Guinea remains at moderate risk of external debt distress.

### Public finance and investment management reforms
- PFM progress:
  - Most central budgetary units’ bank accounts now included in the TSA.
  - Enhancements to public procurement; new procurement code instated in September.
  - Improved recording of in-year expenditure payment arrears via new functionality in the budget execution system.
  - Planned migration to GFS 2014 with IMF TA.
  - Further work needed on financial reporting, cash management, and debt management.
- PIM progress:
  - Electronic platform for integrated investment management launched with AfDB and UNDP support.
  - Finalization and adoption of the PIM manual underway.

### Monetary and exchange rate policies
- Authorities committed to bringing down central bank advances to statutory limit by end-year.
- Reserve money growth was 40 percent (y-o-y) at end-September; program projection around 16 percent.
- Monetary base needs reduction by about 1.8 percent of GDP.
- BCRG committed to issuing sterilization bonds (Titres de Régulation Monétaire) to contain monetary expansion and reduce reserve money growth to target levels.
- Rule-based FX intervention strategy implemented; completion of prior action caps a process of increased exchange rate flexibility.
  - Electronic trading platform installed with AfDB support.
  - Central bank’s international reserves improved from US$686 million at end-2017 to US$1,245 million projected at end-2020.
- Safeguards assessment initiated in context of RCF disbursement; outstanding issues include:
  - Finalizing external audit of foreign exchange reserves at end-June 2020.
  - Conducting a review of currency operations.
  - Strengthening internal audit capacity and Audit Committee oversight.
  - Revision of the BCRG law initiated, expected to be completed by April 2021.

### Financial stability and inclusion
- Measures to protect private sector:
  - Establishment of a guarantee fund for SME loans and a fund to support firms in the informal sector.
  - Delay in operationalizing the SME fund; governance and accountability frameworks need finalization.
  - Authorities encouraged to develop and implement the financial inclusion strategy with World Bank support to strengthen credit access for SMEs, women and youth.
- Banking supervision:
  - Progress slowed by the pandemic in implementing 2019 Financial Sector Stability Review recommendations.
  - Risk-based AML/CFT supervision framework operationalized in October 2019.
  - Priorities: increase human resources for supervision, strengthen early intervention policy, operationalize emergency liquidity assistance and banking resolution frameworks, finalize legal framework of deposit guarantee fund with IMF TA.

### Social safety nets and poverty impact
- Poverty context:
  - Most recent official poverty survey in 2018 showed nearly 45 percent of the population lived below the national poverty line.
  - The pandemic worsened conditions for vulnerable households and informal sector workers.
- Cash and food transfers plan:
  - Aims to provide digital cash transfers to 240,000 households in the social registry; World Bank financing covers 150,000 households.
  - Delays in meeting conditions for external financing limited expansion; late expansion expected in late November.
  - ANIES provided digital transfers to 17,000 Conakry households meeting PMT threshold.
  - 7,000 Conakry households not meeting PMT threshold to receive food transfers with World Food Program help.
  - By September only one-tenth of intended recipients had received transfers.

*Sources: Guinean authorities; and Fund staff estimates and projections.*

### 31.      Strengthening the anti-corruption framework will improve governance. The authorities

### 31.      Strengthening the anti-corruption framework will improve governance.

### Anti-corruption measures and implementation status
- The authorities adopted in March 2020 the implementing decree of the asset declaration regime (missed end-September SB) and are working on the finalization of the asset declaration regime in line with international best practices.
- An asset declaration form was finalized, with the support of World Bank TA, and published on the website of the court of audit (missed end-June SB, Prior action).
- The first submissions to start implementing the regime are expected in early 2021.
- The authorities have allocated resources in the draft 2021 budget for the Court of Audit to put in place the necessary institutional structure.
- A draft AML/CFT law was finalized in April 2020, with the support of IMF TA, and is expected to be adopted by the Council of Ministers in November.
- Policy implication: Implementing the asset declaration regime and adopting the AML/CFT law will support anti-corruption efforts and improve governance.

### Program modalities and financing risks
- The program is fully financed. Guinea’s external financing needs in 2020 are expected to be covered by multilateral and bilateral financing, including Fund disbursements under the RCF and the ECF.
- While the authorities’ planned policies are expected to be fully financed through 2021, a more protracted outbreak or the materialization of downside global risks could prompt the emergence of new financing needs in the medium term.
- Potential medium-term risks include: deterioration of the terms of trade due to increased global oil prices or lower metals prices, decreased demand for bauxite from trade partners, and less availability of donor financing.

### Fund obligations and program adjustments
- Outstanding obligations to the Fund stand at SDR 327 million (about 3 percent of GDP).
- The authorities request waivers for the nonobservance of the end-December 2019 PC on the basic fiscal balance, and the end-June PCs on the net domestic assets of the central bank and net government borrowing from the central bank.
- To support their request, the authorities have completed 3 prior actions and are expected to complete the remaining one before the Board meeting (MEFP Table 2).
- Authorities are taking corrective actions to bring government borrowing from the central bank within its statutory limit by end-December, and to reduce the rate of growth of reserve money through increased sterilization.

### Capacity development and technical assistance
- TA priorities have been aligned with the program objectives, with a focus on revenue administration, public financial management, debt management, tax policy and real sector statistics.
- After some slowdown following the COVID-19 outbreak, TA delivery is gradually restarting under virtual mode.

### Staff appraisal — growth, sectoral dynamics, and risks
- Although overall growth has been buttressed by a buoyant mining sector, the non-mining economy has been significantly affected by the pandemic.
- Real growth is projected to reach 5.2 percent, but the non-mining economy would only grow by 2.4 percent.
- The improved mining production has not translated into higher fiscal revenue or more reserves.
- The authorities have relied on spending reallocation and external finance to support their pandemic response plan.
- Barring a second wave of infection, non-mining activity is expected to recover in 2021.
- Risks to the outlook are tilted to the downside.

### Fiscal policy assessment and recommendations
- The 2020 fiscal relaxation to support the authorities’ crisis response plan is adequate.
- The widening of the basic fiscal balance by 3 percent reflects the revenue shortfalls and necessary expenditure to increase health spending and transfers to protect the most vulnerable and the private sector.
- Authorities have made progress with their transparency commitments undertaken at the time of the RCF and are advised to continue implementing their budget transparently and minimize recourse to exceptional spending procedures.
- Electricity spending increases are noted as unfortunate because electricity subsides are untargeted; once the crisis is over, electricity subsidy reform should continue to ensure tariffs reflect cost recovery and generate fiscal space for capital and social investment.
- The 2021 draft budget properly supports the post-pandemic recovery while ensuring debt sustainability.

### Social safety nets
- Progress to strengthen social safety nets should continue.
- The pandemic is expected to exacerbate poverty and inequality.
- Execution of the response plan in this sector needs to be accelerated to ensure the most vulnerable receive support on a timely basis.

### Revenue mobilization and mining sector policies
- Revenue mobilization remains critical over the medium term.
- Authorities are encouraged to step up their plan to implement their revenue mobilization strategy, agreed at the time of the Fourth ECF review.
- It is essential to apply the provisions of the mining code, limiting exonerations and exemptions and being mindful of transfer pricing issues, to ensure Guinea can duly benefit from its mineral resource wealth.

### Debt sustainability and public investment
- Guinea’s debt remains sustainable, at moderate risk of external debt distress, on the basis of an ambitious but also realistic investment plan over the medium term.
- It is essential to maintain prudent external borrowing policies, maximizing the recourse to concessional borrowing.
- Progress should continue on enhancing public investment management to maximize investment returns and improve transparency and efficiency.
- Staff welcomes the authorities’ intention to adopt the public investment manual by the end of 2020.
- PFM reforms to strengthen budget execution and improve cash and debt management are essential to support transparency and accountability and should continue.

### Central bank advances and monetary implications
- The reimbursement of the central bank advances is critical to maintain inflation under control.
- Temporary central bank advances used to pre-finance some COVID-19-related spending should be fully repaid once the external financing is disbursed to avoid inflationary consequences of the liquidity creation.
- Staff welcomes the authorities’ actions and commitments to reduce the advances to their statutory limit by end-year, and the BCRG’s plans to use active liquidity management to reduce the rate of growth of reserve money.

### Exchange rate policy and external buffers
- Staff commends progress in enhancing foreign exchange flexibility while building external buffers against shocks.
- Foreign exchange reserves are broadly adequate—supported by the authorities’ active accumulation during the ECF arrangement.
- Recent steps to enhance exchange rate flexibility and introduce a rule-based intervention strategy to reduce discretion are welcome.
- Commitment to the policy framework will be needed to ensure continued implementation, avoid further real appreciation of the currency and preserve international reserves.

- Staff welcomes progress achieved in the process of strengthening the anti-corruption framework and encourages the authorities to continue the reforms; the adoption of the asset declaration form is a critical step to allow for the operationalization of the new system, expected to start in 2021, and increase transparency and accountability.

*International Monetary Fund*

### 44.      In view of the satisfactory program performance at end-December 2019, corrective

### 1ginea2020005 - 44. In view of the satisfactory program performance at end-December 2019, corrective

### Program assessment and IMF decisions
- Staff supports the authorities’ request for:
  - completion of the fifth and sixth (and final) reviews under the ECF arrangement;
  - waivers for nonobservance of performance criteria;
  - completion of the financing assurances review.
- Rationale cited:
  - corrective actions taken in response to the missed criteria associated with the COVID-19 exogenous shock;
  - progress in reforms as set out in the authorities' Letter of Intent and MEFP;
  - the measures in the Letter of Intent and MEFP are necessary to ensure program objectives remain achievable.
- Assessment statements:
  - "The capacity to repay the Fund remain adequate and risks to the program are manageable."

### Macroeconomic outlook (selected projections and actuals)
- Real GDP at constant prices (annual percentage change):
  - 2017: 10.3
  - 2018: 6.2
  - 2019: 5.6
  - 2020 (Prel./4th Rev./RCF): 5.8 / 1.4 / 5.2
  - 2021–2025 (Proj.): 5.5, 5.2, 5.0, 5.0, 5.0
- GDP at market prices (annual percentage change):
  - 2017: 21.9
  - 2018: 16.8
  - 2019: 15.4
  - 2020 (Prel./4th Rev./RCF): 14.4 / 10.1 / 15.7
  - 2021–2025 (Proj.): 14.0, 13.5, 13.5, 13.1, 13.1
- Consumer prices (average, annual percentage change):
  - 2017: 8.9
  - 2018: 9.8
  - 2019: 9.5
  - 2020 (Prel./4th Rev./RCF): 8.5 / 9.1 / 10.2
  - 2021–2025 (Proj.): 8.0, 7.9, 7.8, 7.8, 7.8

### External sector (selected figures)
- Exports, f.o.b. (US$ terms, annual percentage change):
  - 2017: 68.7
  - 2018: -2.3
  - 2019: -0.8
  - 2020 (Prel./4th Rev./RCF): 17.2 / -3.6 / 22.1
  - 2021–2025 (Proj. annual % change): 5.9, 6.8, 9.7, 11.1, 6.3
- Imports, f.o.b. (US$ terms, annual percentage change):
  - 2017: -6.6
  - 2018: 21.8
  - 2019: -8.0
  - 2020 (Prel./4th Rev./RCF): 33.4 / 12.6 / 9.7
  - 2021–2025 (Proj. annual % change): 8.1, 3.2, 7.6, 5.8, 5.6
- Current account balance (including official transfers, percent of GDP):
  - 2017: -6.7
  - 2018: -20.3
  - 2019: -13.7
  - 2020 (Prel./4th Rev./RCF): -21.9 / -20.9 / -12.3
  - 2021–2025 (Proj.): -14.2, -12.1, -11.1, -9.9, -10.4
- Overall balance of payments (US$ millions):
  - 2017: 72.0
  - 2018: 210.7
  - 2019: 303.5
  - 2020 (Prel./4th Rev./RCF): -62.7 / -446.8 / -265.8
  - 2021–2025 (Proj. US$ millions): 64.2, 231.7, 189.5, 191.5, 98.9

### Fiscal position and projections (central government)
- Total revenue and grants (percent of GDP):
  - 2017: 15.3
  - 2018: 14.5
  - 2019: 14.4
  - 2020 (Prel./4th Rev./RCF): 15.2 / 13.6 / 14.7
  - 2021–2025 (Proj.): 14.4, 15.1, 15.6, 16.1, 16.4
- Revenue (percent of GDP) and non-mining revenue:
  - Revenue 2019: 13.7
  - Non-mining revenue 2019: 11.4
- Total expenditure and net lending (percent of GDP):
  - 2017: 17.3
  - 2018: 15.6
  - 2019: 14.6
  - 2020 (Prel./4th Rev./RCF): 18.2 / 17.3 / 18.3
  - 2021–2025 (Proj.): 16.8, 17.3, 17.9, 18.2, 18.6
- Capital expenditure (percent of GDP):
  - 2017: 5.7
  - 2018: 4.9
  - 2019: 3.6
  - 2020 (Prel./4th Rev./RCF): 6.8 / 4.9 / 4.7
  - 2021–2025 (Proj.): 5.3, 6.0, 6.6, 6.7, 7.2
- Overall budget balance (including grants, percent of GDP):
  - 2017: -2.1
  - 2018: -1.1
  - 2019: -0.5
  - 2020 (Prel./4th Rev./RCF): -3.0 / -3.7 / -3.6
  - 2021–2025 (Proj.): -2.4, -2.2, -2.3, -2.1, -2.2
- Basic fiscal balance (percent of GDP):
  - 2017: -1.1
  - 2018: 0.8
  - 2019: 0.6
  - 2020 (Prel./4th Rev./RCF): 0.6 / -2.0 / -2.3
  - 2021–2025 (Proj.): 0.5, 0.8, 1.0, 0.7, 0.5

### Monetary and financial sector (selected indicators)
- Broad money (M2) annual percentage change:
  - 2017: 15.8
  - 2018: 10.2
  - 2019: 23.0
  - 2020 (Prel./4th Rev./RCF): 21.7 / 10.4 / 13.6
  - 2021–2025 (Proj.): 15.0, 17.9, 13.5, 12.3, 11.2
- Reserve money (annual percentage change):
  - 2017: 10.3
  - 2018: 6.3
  - 2019: 16.8
  - 2020 (Prel./4th Rev./RCF): 3.0 / 1.8 / 9.6
  - 2021–2025 (Proj.): 10.3, 17.5, 13.6, 12.6, 11.6
- Net foreign assets of the central bank (US$ millions, end-period memorandum):
  - 2017: 322.1
  - 2018: 547.0
  - 2019: 868.5
  - 2020 (Prel./4th Rev./RCF): 918.8 / 882.1 / 789.2
  - 2021–2025 (Proj. US$ millions): 865.3, 1,062.6, 1,207.8, 1,342.6, 1,418.7
- Gross available reserves (months of imports):
  - 2017: 2.6
  - 2018: 3.3
  - 2019: 4.7
  - 2020 (Prel./4th Rev./RCF): 3.8 / 3.8 / 3.8
  - 2021–2025 (Proj.): 4.1, 4.1, 4.1, 4.1, 4.1

### Financial soundness indicators (selected)
- Regulatory Capital to Risk-Weighted Assets (end period):
  - 2017Q1: 17.25
  - 2018Q4: 15.24
  - 2019Q4: 15.41
  - 2020Q2: 15.91
- Non-performing Loans to Total Gross Loans (end period):
  - 2017Q1: 6.66
  - 2018Q4: 11.81
  - 2019Q4: 10.39
  - 2020Q1: 10.46
  - 2020Q2: 10.75
- Return on Assets (end period):
  - 2017Q1: 2.58
  - 2018Q4: 2.07
  - 2019Q4: 2.40
  - 2020Q2: 2.79
- Liquid Assets to Total Assets (Liquid Asset Ratio) (end period examples):
  - 2017Q1: 24.35
  - 2019Q4: 23.20
  - 2020Q2: 25.14

### Indicators of capacity to repay the IMF (as of November 6, 2020)
- Fund obligations based on existing credit (Principal, millions of SDRs):
  - 2020: 0.0
  - 2021: 0.0
  - 2022: 38.3
  - 2023: 34.4
  - 2024: 37.6
  - 2025: 38.1
  - 2026: 44.1
  - 2027: 38.6
  - 2028: 35.2
- Outstanding credit based on existing and prospective drawings (millions of SDRs):
  - 2020: 361.4
  - 2021: 341.3
  - 2022: 303.1
  - 2023: 268.8
  - 2024: 231.2
  - 2025: 193.1
  - 2026: 142.1
  - 2027: 96.6
  - 2028: 54.5
- Outstanding credit as percent of exports of goods and services:
  - 2020: 10.3
  - 2021: 9.4
  - 2022: 7.9
  - 2023: 6.4
  - 2024: 5.0
  - 2025: 3.9
  - 2026: 2.7
  - 2027: 1.7
  - 2028: 0.9
- Outstanding credit as percent of quota:
  - 2020: 168.7
  - 2021: 159.3
  - 2022: 141.5
  - 2023: 125.5
  - 2024: 107.9
  - 2025: 90.1
  - 2026: 66.3
  - 2027: 45.1
  - 2028: 25.4
- Memorandum items:
  - Exports of goods and services (millions of US$):
    - 2020: 4,898
    - 2021: 5,184
    - 2022: 5,535
    - 2023: 6,068
    - 2024: 6,734
    - 2025: 7,156
    - 2026: 7,699
    - 2027: 8,275
    - 2028: 8,892
  - Gross International Reserves (millions of US$):
    - 2020: 1,245
    - 2021: 1,307
    - 2022: 1,496
    - 2023: 1,625
    - 2024: 1,751
    - 2025: 1,811
    - 2026: 1,916
    - 2027: 2,025
    - 2028: 2,141

### Quantitative performance criteria and indicative targets (selected outcomes)
- Basic fiscal balance (floor; cumulative change for the year) — status highlights:
  - IT/Adj. IT/Act. entries show mixed compliance: some quarters "Met", some "Not Met". Example entries:
    - March 2019: IT 548, Adj. IT 592, Act. 497 — Status: Not Met
    - Dec 2019: IT 265, Adj. IT 265, Act. 429 — Status: Met
    - Sept 2020: IT 622, Adj. IT 474, Act. -2,340 — Status: Not Met
- Net domestic assets of the central bank (ceiling; stock) — compliance mixed, example:
  - March 2019: IT 5,518, Adj. IT 5,585, Act. 6,871 — Status: Not Met
  - June 2019: IT 5,856, Adj. IT 6,064, Act. 5,810 — Status: Met
- Net government budgetary borrowing from the central bank (ceiling; stock) — several "Not Met" readings; examples correspond to the net domestic assets entries above.
- Continuous performance criteria:
  - New non-concessional external debt contracted or guaranteed by the central government or central bank (cumulative ceiling); US$ million:
    - ceiling: 650; Act: 658 — Status: Met across reported periods.
  - New external arrears of the central government and central bank (ceiling): 0 — Status: Met across reported periods.
- Indicative targets:
  - Tax revenues collected (floor) — several periods "Not Met"; example:
    - March 2019: IT 12,939, Act. 12,186 — Status: Not Met
  - Domestically financed social safety programs to reduce poverty (cumulative floor) — several periods "Met"; example:
    - March 2019: IT 98, Act. 272 — Status: Met
  - New domestic arrears accumulated by the central government (net) — mixed compliance; example:
    - March 2019: IT -857, Act. -556 — Status: Not Met
- Memorandum item (new concessional external debt contracted or guaranteed; US$ million): sample entries show varied accumulated face values by period (table shows multiple values across review periods).

*Source: Guinean authorities; and Fund staff estimates, projections, and assessments as presented in the provided IMF document.*

### 1. Gross financing requirements8892,5072,7702,2632,8272,3172,8873,0672,3552,2932,6952,7963,4003,1102,1212,6082,5262,4452

### 1. Gross financing requirements

### Gross financing requirements (table row)
- 8892,5072,7702,2632,8272,3172,8873,0672,3552,2932,6952,7963,4003,1102,1212,6082,5262,4452,3412,511

### External current account deficit (table row)
- 7442,2122,4601,9462,5232,0372,6002,8212,1421,9152,3802,5953,3323,0702,0542,3982,1732,1482,0492,292

### Capital account balance (table row)
- 1
- -3-17-3-3-23-3-3-23-23-23-3-24-24-24-24-25-25-26-27-28

### Debt amortization (table row)
- 467777846767747070708684849179123134144138145

### Change in arrears, net (table row)
- 2
- 0 0000 0000100000   00000

### Gross reserves accumulation (table row)
- 102235236236259212212195162327192101-31-65-276318912912659

### IMF Repayments (table row)
- 3
- 0   0000   444444040393939   4955505442

### 2. Available financing

### Available financing (table row)
- 8492,3962,6412,1362,7012,1932,7742,8962,2212,1772,5812,6853,2472,6081,7622,6082,5262,4452,3412,511

### Foreign direct investment, net (table row)
- 4
- 1,3861,3141,5861,5931,8611,2161,2591,2831,2941,8951,9011,9401,6031,2147841,2621,4621,6121,5411,660

### Identified disbursements (table row)
- 3071,0821,0575433999771,4841,5098331866607301,6441,3939171,2981,052844810848

### Grants (table row)
- 17515012518815013211812612665125131119147259165156164177183

### Project (table row)
- 1439992155118929397974110110797961248478828891

### Program (table row)
- 33   51333232   402530292424  24  22  22 1348177828993

### Loans (table row)
- 1329329323562508451,3661,3837071225355991,5251,5256581,133896680633665

### Project loans (table row)
- 1329229213562508341,3661,323647615355991,5251,5256431,093856638589618

### Program loans (table row)
- 0101100100606061000015 4040424446

### Other flows (table row)
- -8510-30440030104949621150040-11-11-112

### Debt relief (table row)
- 1,2
- 600000000000050574823000

### G-20 Debt Service Suspension Initiative (table row)
- 25  3200000

### CCRT grants (table row)
- 25254823000

### 3. Residual financing

### Residual financing (table row)
- 5
- -40-111-129-127-127-124-113-171-134-115-114-112-153-453-36000000

### ECF and RCF disbursement (table row)
- 2448494949504848242449487121721700000

### World Bank budget support (table row)
- ...406060
- 60
- 504010090914040408080............... 

### EU budget support (table row)
- 16222018182425232002523424242...............

### African Development Bank (table row)
- 2020
- ...............

### Residual financing gap (table row)
- -93    000000

### Sources
- Guinean authorities; and IMF staff estimates and projections.
- Notes:
  - 1 Excludes public transfers and  capital grant from IMF CCR Trust for debt cancellation.
  - 2 Projected clearance of outstanding debt arrears to non-Paris Club official creditors and commercial creditors through debt relief.
  - 3 Excludes debt relief provided under the IMF's CCR Trust.
  - 4 Includes private short-term capital flows.
  - 5 For 2019, this reflects actual disbursments.
- 2017201820192020

*Source: 1ginea2020005 - 1. Gross financing requirements (IMF staff and Guinean authorities).*

### Annex I. Guinea’s COVID-19 Response Plan — key findings and costs

- Initial plan adopted in early April; National Emergency Preparedness and Response Plan builds on Ebola experience of 2014-2015.
- Initial cost estimated at 1.5 percent of GDP; current total cost of the plan is of 1.8 percent of GDP.
- Plan components and focus:
  - Bolstering the health system: largest share; improve surveillance systems and health infrastructure; purchases of medical services and equipment; limited hospital bed capacity of 530 bed units in the country.
  - Increasing social support: increased cash transfers, building food stocks, subsidies to households for electricity and water.
  - Supporting the private sector: tax exemptions for health equipment, support to hospitality sector, support for farmers; about 15 percent of private sector support went toward creation of a special fund to provide financing and loan guarantees to firms (focus on SMEs); support available to firms including tourism, transport, agricultural sectors.
- Execution through September: authorities executed about 70 percent of planned expenditure; most planned health spending materialized; execution rates for social spending and private sector support fell short.
- Financing: mix of expenditure reallocation (particularly capital spending) and foreign-financed emergency support.
- Comparative note: Guinea has spent less thus far on response plan than regional peers but has also seen fewer cases than peer countries.
- Table: Guinea COVID-19 Response Plan (Percent of GDP)
  - I. Health 0.88 6.8
  - o/w tax measures 0.28 8.9
  - II. Social Inclusion 0.64 3.9
  - III. Private Sector 0.46 6.4
  - Total 1.8 7.8
- Monetary policy response:
  - BCRG lowered policy rate in April from 12.5 to 11 percent.
  - Reduced reserve requirements to support liquidity in the banking sector by 100 basis points.
- Prudential regulatory measures announced by central bank:
  - Lowered liquidity coverage ratio from 100 to 80 percent.
  - Suspended NPL classification for businesses and individuals impacted by pandemic and provisioning of such loans.
  - Relaxed limits on foreign exchange positions (from 20 to 25 percent of capital for net position, and 10 to 12.5 percent for position in each currency).
  - Dividend payments suspended; curb technical assistance fees to parent companies.
  - Postponed payment of supervision-related fees and contributions to deposit insurance scheme.
  - Insurance companies required to postpone payment of premia due during pandemic and allow policy suspension upon customer request.

### Annex II. Mining Sector: Recent developments and revenue considerations

- Real mining GDP projected to expand by 18 percent y-o-y by end-2020.
- Bauxite production increased by 21 percent (y-o-y) at end-September 2020; two new mining companies GAC and Chalco entered production, adding about 7 million tons to overall production (equivalent to 11 percent of 2019 production) by end-September 2020.
- Alumina production increased by 42 percent y-o-y at end-September 2020.
- Inaugural exports from Forecariah iron ore deposits expected in last quarter of 2020.
- Artisanal gold exports recorded through official channels were at a record 54 tons at end-August 2020; 2019 official artisanal gold exports amounted to 14 tons.
  - Note: increased official exports partly reflect better capture of existing production due to closure of land borders forcing production through official channel at the central bank.
  - Estimated about 60 percent of artisanal gold production in Guinea was being exported through the official channel prior to 2017 (Diagnostic de l’exploitation artisanale de l’or en Republique de Guinee. Ministère des Mines et Géologie, Septembre 2017).
- Mining activity expected to remain strong in the medium-term supported by new projects, including alumina refineries and iron ore extraction (Mount Nimba and Simandou deposits).
- Despite production (+18 percent) and exports (+25 percent) increases in 2020, mining revenues are projected to decline by 9.4 percent.
- Legal and tax framework:
  - 2013 amendments to the Mining Code align with international standards.
  - Mining companies subject to corporate taxes under the General Tax Code: 30 percent corporate income tax on profits, 10 percent tax on income derived from investment, 1.5 percent minimum tax on turnovers.
  - Royalties: 0.15 percent of the LME aluminum price on bauxite; 5 percent of the LME price for iron ore; 5 percent of the London PM fix for precious metals.
  - Many mining conventions signed before 2013 diverge from these provisions; reduced royalties for local transformation.
- Causes of discrepancy between production/exports and mining revenues (listed in order of importance):
  - Tax base erosion through transfer pricing; implementation challenges despite 2013 Code provisions and 2019 international taxation provisions; further measures in Fund-supported revision of General Tax Code in preparation.
  - Extensive exonerations to the provisions of the Mining Code; many company-level conventions deviate from the Code.
  - Grandfathering of companies with conventions signed before the 2013 Mining Code.
  - Investments in infrastructure around mining sites justifying tax exemptions.
  - Artisanal gold production and exports untaxed since suspension in 2017 to encourage formalization; significant in 2020 with spike in production.
  - Time lag between production start and income tax payments in capital-intensive industries.

### Annex III. Risk Assessment Matrix — selected risks, likelihood, impacts, and policy responses

- Global risks: Conjunctural
  - Unexpected shift in the COVID-19 pandemic (downside).
    - Likelihood: High
    - Impact if realized: High. Tighter financing conditions and reduced growth could worsen external and fiscal positions leading to higher debt vulnerabilities.
    - Policy response: Create fiscal space for scaling-up health spending and mitigation measures. Protect the most vulnerable through targeted measures.
  - Intensified geopolitical tensions and security risks.
    - Likelihood: High
    - Impact if realized: Medium. Large-scale investment projects would likely be postponed, weakening medium-term growth.
    - Policy response: Intensify structural reform to remove bottlenecks to growth and support economic diversification. Create fiscal space to scale-up priority spending and advance reforms.
  - Oversupply and volatility in the oil market.
    - Likelihood: Medium
    - Impact if realized: Medium. Lower energy prices could increase tax revenue and reduce external balances.
    - Policy response: Implement the automatic price adjustment mechanism for petroleum products to allow pass-through to domestic prices. Build external buffers and allow greater exchange rate flexibility.

- Domestic risks
  - High risks of political and social instability surrounding the Presidential elections.
    - Likelihood: High
    - Impact if realized: High. Investment and growth could be affected; program implementation could weaken; macroeconomic stability could deteriorate.
    - Policy response: Ensure a transparent, fair and inclusive post-electoral process. Focus reforms on areas less sensitive to socio-political environment. Ensure transparency in the implementation of the COVID-19 response plan. Improve inclusiveness of government policies.

*Source: IMF staff report and Guinean authorities.*

### Annex IV. The BCRG’s Evolving Foreign Exchange Policy Under

### Annex IV. The BCRG’s Evolving Foreign Exchange Policy Under the ECF Arrangement

### Exchange rate policy evolution
- After managing the official rate tightly around 9,000 GNF/USD since mid-2017, in October 2018 the BCRG moved to allow gradual depreciation through a crawl-like arrangement, with the exchange rate fluctuating within a narrow range with respect to a linear trend.
- The crawl-like arrangement moderated the pace of real effective appreciation but did not fully keep up with the inflation differential with respect to Guinea’s trade partners.
- The gap between the official and parallel exchange rates has remained below 2 percent since early 2017 and has been virtually eliminated in recent months.

### Foreign exchange market operations during the pandemic
- The central bank’s operations in the foreign exchange market grew during the pandemic.
- Through October 2020, the BCRG held competitive auctions for FX sales and purchases on Tuesdays and Fridays, as well as a daily purchase facility that has supported gradual reserve accumulation.
  - Note: Auctions stopped being held on Tuesdays in March 2019.
- The BCRG’s gross FX sales totaled US$130 million in 2019 (1 percent of GDP).
- Authorities estimate BCRG operations represent a small share of overall FX market volume, with about 85 percent accounted for by transactions between banks and foreign exchange bureaus.
- The daily purchase facility will be maintained and will not be subject to the rule-based policy; amounts purchased through this facility are small and calibrated based on medium-term reserve accumulation objectives rather than the management of short-term market dynamics.

### Rule-based FX intervention adopted November 2020
- Following improvements to market infrastructure—including the installation of a digital trading platform—the BCRG adopted a rule-based FX intervention policy in November 2020, developed with IMF TA support.
- Under the rule:
  - The BCRG does not hold an auction to purchase (sell) foreign exchange unless the exchange rate has appreciated (depreciated) by more than 0.25 percent with respect to its 5-day moving average.
  - The amount of intervention is not to exceed US$8 million per intervention.
- The rule is public knowledge and replicable by market participants to ensure transparency.
- Considering data since January 2018:
  - The rule’s trigger would only have been activated in about 2 percent of trading days.
  - Actual FX sales over that period occurred in 20 percent of trading days.
- The new policy is expected to:
  - Lead to significant changes in the functioning of the foreign exchange market.
  - Have the central bank assume a more passive role while allowing greater flexibility for the exchange rate to respond to market forces.
  - Prevent the BCRG from simultaneously participating on both sides of the market (as both buyer and seller of foreign exchange).

### Exchange rate developments (notes from annex)
- Notes: Daily frequency. Last observation 11/11/2020.
- Chart axis labels and bands referenced: Official Rate (GNF/USD); Linear Trend; +/- 2%; +/- 1%.

### Program context and related macroeconomic outcomes (from Letter of Intent and MEFP)
- Over the period 2017-2020:
  - Economic growth averaged over 5 percent.
  - Inflation averaged less than 10 percent.
  - Foreign exchange reserves grew from 2.6 months of import coverage in 2017 to 3.9 months at the end of September 2020.
  - The basic budget balance improved from a deficit of 1.1 percent of GDP in 2017 to a surplus of 0.6 percent in 2019.
  - Average infrastructure investment over the last three years was 4 1/3 percent of GDP.
- COVID-19 impacts and response:
  - Mining sector growth expected at 18.4 percent for 2020; total GDP growth expected at 5.2 percent in 2020.
  - Headline inflation: 9.1 percent at end-December 2019; rose to 11.6 percent in April 2020; 10.6 percent at end-September 2020; projected to fall back to 9.6 percent at end-2020.
  - Food prices: rose to 13.4 percent (year-on-year) in April 2020; 12.3 percent by end-September 2020.
  - Core inflation (excluding food and energy) fell to 3.1 percent (year-on-year) at end-September 2020.
  - Current account deficit expected to widen to 12.3 percent of GDP in 2020, compared to 13.7 percent of GDP in 2019.
  - Targeted international reserves: reached 4.7 months of import coverage in 2019 and targeting 3.8 months of coverage in 2020.
- Fiscal and monetary measures:
  - For 2020, agreed basic fiscal balance: GNF -3428 billion (equivalent to -2.3 percent of GDP).
  - For 2021, basic fiscal balance: GNF 867 billion (0.5 percent of GDP).
  - Policy rate lowered to 11.5 percent.
  - Reserve requirement ratio reduced by 100 basis points to 15 percent.
  - Credit to the private sector increased by 16.7 percent (average, year-on-year) at end-September 2020 from 23.8 percent at end-2019.
  - Net commercial bank lending to the government increased by 44.6 percent (average, year-on-year) at end-September 2020.
  - Deposits with banks increased 23 percent (average, year-on-year) at end-September 2020.
  - Foreign currency deposits increased from 13.5 percent (average, year-on-year) at end-2019 to 25.3 percent at end-September 2020.
  - Excess reserves in local currency replenished to GNF 1,949 billion at end-September 2020 after a prior decline following bank subscription to GNF 1,302 billion in three-year bond issuances.

*Source: Annex IV and related sections of the IMF staff report material provided in the content unit.*

### 13.      The results obtained in relation to the program objectives for the end of December

### 13.      The results obtained in relation to the program objectives for the end of December

### Results versus program targets (end-December 2019 and preliminary end-June 2020)
- End-December 2019: All performance criteria (PCs) and indicative targets (ITs) at end-December 2019, except one, have been met.
- Basic fiscal balance at end-2019: 0.6 percent of GDP (0.04 percent of GDP below the program target).
- Preliminary end-June 2020:
  - PC for net international reserves: met (supported by disbursements related to COVID-19).
  - PC for the basic fiscal balance: met (partly due to weak execution of public investments).
  - Continuous PCs on contracting/guaranteeing non-concessional external debt and non-accumulation of new external arrears: met.
  - ITs on domestically financed social safety nets programs and domestic arrears: met.
  - IT on revenue: not met (shortfalls in tax revenue due to the crisis).
  - PCs on net domestic assets and net government budgetary borrowing from the central bank: not met (higher-than-expected budget financing needs; central bank advances to the Government).
- Government response and corrective measures:
  - Requested waivers on grounds of exceptional situation and corrective measures taken.
  - Fiscal space created to increase health spending and mitigation measures by around 1.8 percent of GDP via limits on non-priority spending and mobilization of additional external resources.
  - Draft 2020 supplementary budget law presented to Parliament; draft 2021 budget law to be presented by the Board meeting (prior actions).
  - Continued implementation of Treasury bond issuance program; launch in 2021 of new 2-year bonds to reduce recourse to central bank financing.

### Progress on structural benchmarks
- Achievements:
  - Adopted a multi-year electricity tariffs reform strategy for 2020-25.
  - Adopted implementation decree of the 2017 corruption law on the asset declaration regime and whistle blowers and victims’ protection.
  - Established a prototype of the unified social register of vulnerable populations.
  - Prepared and ratified tax expenditure assessment to accompany the new mining convention for iron ore extraction (Simandou I and II) — ratified in July 2020.
  - Finalized and published the asset declaration form on the website of the Court of Audit (prior action).
  - Implemented the BCRG's rule-based foreign exchange intervention strategy (prior action).
- COVID-19 impacts and pending actions:
  - No further progress on electricity tariff reform (draft decree prepared and submitted for signature).
  - Government covered water and electricity bills for population subscribed to the social block during the pandemic.
  - Working to adopt a manual for preparation, appraisal, and selection of priority investment projects by December 2020.

### Fiscal policy commitments and strategy
- Overarching goals:
  - Preserve macroeconomic stability.
  - Create fiscal space to prioritize social spending and health systems; increase priority spending to support growth while preserving stability.
- Key measures to ensure fiscal space and crisis support:
  - Continue mobilizing tax revenues, including in the mining sector.
  - Implement essential public investments with careful prioritization and good public investment management.
  - Concessional external borrowing in 2020 to finance crisis response (strengthening health infrastructure and mitigation measures).
  - Rephase non-priority public investments in 2020 to create fiscal space.
  - Commitment to not sign any non-concessional external loans; US $650 million envelope of non-concessional loans under the program fully utilized.
  - Commit to increasing public investments at a more moderate pace in 2021-2022 compared to pre-pandemic forecasts.
  - If external program loans and grants exceed expectations, direct additional spending to priority sectors (health systems, social spending, social safety nets) in consultation with IMF staff.
  - In future project loan planning, take debt sustainability into account and implement projects consistent with a moderate risk of debt distress.

- Fiscal strategy for 2020:
  - Target basic fiscal balance for 2020: -2.3 percent of GDP.
  - Submitted draft supplementary budget law for 2020 reflecting ECF understandings (prior action).
  - Expenditure commitment plan adopted by Council of Ministers to guarantee end-of-year program budgetary objective aligned with basic budget balance of -2.3 percent of GDP.
  - Revenue mobilization forecasts for 2020:
    - Mining tax revenues: 1.5 percent of GDP.
    - Non-mining tax revenues: 10.5 percent of GDP.
    - Direct taxes: 2.1 percent of GDP.
    - Indirect taxes: 8.4 percent of GDP.
    - Taxes on goods and services: 6.2 percent of GDP.
    - Taxes on international trade: 2.2 percent of GDP.
    - Non-tax revenues: expected to fall after payment of last tranche for the 4G license at end-2019.
  - Spending decisions for 2020:
    - Payroll increase allowed: 0.4 percent of GDP (year-over-year) to 3.8 percent of GDP.
    - Spending on goods and services: 3.5 percent of GDP.
    - Transfers and subsidies (bulk of COVID response): allowed to grow to 5.3 percent of GDP.
  - Electricity sector impacts and response:
    - Shortfall of around 370GWh due to delayed Souapiti dam commissioning; increased use of thermal generation and rented boat.
    - Response initially provided free electricity up to 330 kWh for social block subscribers; later targeted to lower threshold of 250 KwH per month from October.
    - Plan to pursue electricity subsidy reform with World Bank assistance to achieve full cost recovery (paragraph 26).
  - Investment spending in 2020:
    - Total investment spending: 4.7 percent of GDP.
    - Public investments financed from domestic resources: 1.6 percent of GDP.
    - Capital expenditure financed by external resources: 3.1 percent of GDP.
  - Financing in 2020:
    - Program grants increased to 1.2 percent of GDP (budget support from World Bank and African Development Bank).
    - IMF budget support under the Rapid Credit Facility: SDR 107.1 million (about $ 148 million).
    - Debt relief under the CCRT: 69.2 million SDR expected over 24 months (about $97.8 million).
    - Suspension of debt service under DSSI: about $32 million.
    - Pending disbursements financed via BCRG advances to Treasury; advances repaid in last quarter when disbursements received to remain within statutory limit.
    - Limit public borrowing from commercial banks to level compatible with provision of credit to private sector.
    - Reduce domestic arrears (net basis) by 0.1 percent of GDP.

- Fiscal strategy for 2021:
  - Target overall deficit for 2021: 2.4 percent of GDP.
  - Draft 2021 budget law to be submitted to National Assembly before Executive Board meeting (prior action).
  - Continue mobilizing tax revenue and phase out tax exemptions.
  - Capital expenditure envelope to remain below pre-crisis projections to return to fiscal sustainability and align with execution capacity.
  - Limit public borrowing from Central Bank and commercial banks to levels compatible with sound credit provision to private sector.
  - Continue repaying domestic arrears and reduce domestic arrears (net basis) by 0.1 percent of GDP.
  - Continue second phase of audit of domestic arrears with support from French Development Agency (AFD).
  - Strengthen implementation of joint instruction on management of outstanding payments to identify categories affected by domestic arrears, with IMF TA support.
  - Begin integrating domestic arrears related to overdue VAT refunds not currently included in stock; reconcile discrepancies between stock and flow of arrears in the TOFE; include repayments and newly created arrears in relevant financing lines of TOFE; include reconciled arrears in domestic debt stock and repay over medium term on basis of prudent fiscal policy and available financing.
  - Commit, with IMF support, to migrate TOFE to format in line with GFSM 2014 (particularly arrears recording).
  - Medium term plan to feed the TOFE from consolidated Treasury balances once produced regularly and quality improved.

### Price, utility, and subsidy adjustments
- Petroleum products:
  - Committed to automatic price adjustment mechanism for petroleum products with communication campaign and accompanying protection measures for most vulnerable.
  - Pump price reductions in 2020: from 10,000 GNF to 9,500 GNF per liter in April, then to 9,000 GNF per liter in June.
  - Committed to adjust pump prices upwards if international oil prices rise and/or exchange rate depreciates; review automatic price adjustment mechanism per IMF TA recommendations from 2019.
- Electricity tariffs and subsidies:
  - Commitment to reduce untargeted electricity subsidies and advance multi-year tariff reform strategy 2020-2025 to bring tariffs to cost recovery.
  - Tariff increases in 2019; bill payments for social block subscribers covered by government from April to September 2020 due to pandemic.
  - Tariff increase scheduled for June 2020 postponed to June 2021 because of the health crisis.
  - Target electricity subsidies and transfers to EDG in 2021: 1.4 percent of GDP.

### Social safety nets and inclusion
- Strengthen domestically-financed social protection programs to protect vulnerable, reduce poverty, and promote inclusion.
- National Agency for Economic and Social Inclusion (ANIES) implements inclusion strategy.
- Since November 2019, household data collection using proxy means testing (PMT).
- Reallocated budgetary savings from 2019 electricity tariff reform to increase resources for non-contributory, domestically financed social protection programs in 2020.
- Program indicative target on domestically financed social safety nets raised to GNF 371 billion at end-2019.
- Pandemic-era expenditures:
  - Domestically financed social protection expenditure: GNF 177 billion at end-June 2020 (from GNF 39 billion at end-March 2020).
  - Identified and supported 17,000 vulnerable households in Conakry with electronic cash transfers (based on PMT).
  - Providing food to 7,000 additional households above PMT threshold with WFP technical advice.
  - World Bank expected to provide cash transfer support to around 150,000 households registered in ANIES social register.

### Monetary and exchange rate policy actions
- Monetary easing to support financial sector under COVID-19 response:
  - Policy rate lowered to 11.5 percent.
  - Reserve requirement ratio reduced by 100 basis points to 15 percent; intend to keep both at these levels for the rest of the year.
  - Central Bank includes loans granted to affected companies (hotels, restaurants and transport), other SMEs, and major importers of food and pharmaceuticals in required reserves calculation.
  - Set up liquidity injection program and activated long-term liquidity injection window to support medium- and long-term credit.
  - Banks, inclusive finance institutions and insurance companies instructed to suspend dividend distribution for fiscal year 2020 and keep technical support costs from parent companies to an absolute minimum.
  - Postponed payment for three months of supervision and control fees and contributions to the deposit guarantee fund for banks.
  - Temporarily relaxed prudential standards for duration of epidemic:
    - Freezing classification and provisioning of non-performing loans to businesses and individuals affected by COVID-19.
    - Reducing the liquidity ratio of banks from 100 percent to 80 percent.
    - Increasing banks' net open position in foreign exchange to capital from 10 percent to 12.5 percent by currency, and overall net position from 20 percent to 25 percent.

*Source: 1ginea2020005 - 13.      The results obtained in relation to the program objectives for the end of December*

### 31.      We have also encouraged the financial sector to facilitate access to certain financial

### Monetary, Financial, and Structural Reform Measures (Guinea)

### Financial sector immediate measures
- Insurance sector:
  - Encouraged insurance companies to defer the collection of maturing insurance premiums during the period of the outbreak, and to suspend insurance policies, at the request of customers.
- Electronic money and mobile-based accounts:
  - Encouraged electronic money establishments to lower transfer fees.
  - Encouraged setting up a system allowing remote opening of accounts solely on the basis of the identification by mobile companies (subject to regularization as soon as possible).

### Monetary policy stance and targets
- Policy orientation:
  - Monetary policy will be active and prudent to keep inflation low.
  - BCRG will target the monetary base in accordance with program objectives of a moderate level of inflation.
  - BCRG stands ready to take necessary measures to maintain a positive real interest rate.
- Recent developments and targets:
  - The monetary base increased by 38.5 percent at end-September 2020, reflecting an increase in external assets and greater recourse to borrowing from the Central Bank.
  - For 2020, target expansion of the monetary base of 15-16 percent (year-on-year), corresponding to:
    - An average inflation rate of around 10.2 percent (average, year-on-year).
    - Growth in credit to the private sector of about 6.6 percent (as a percentage of broad money supply).
- Liquidity management instruments:
  - Use of monetary regulation instruments (TRMs) to manage liquidity and slow the increase of the monetary base.
  - TRM issuance of GNF 808 billion in July 2020.

### Treasury advances, liquidity tools, and operational measures
- Reversal of treasury advances:
  - Began reversing advances to the treasury which exceeded the statutory level in September.
  - Public treasury to bring its indebtedness back to statutory limits at the end of the year through revenue mobilization and external disbursements.
- Liquidity committee and active management:
  - Depending on decisions of the liquidity committee, more active liquidity management will be used to achieve monetary targets.

### Strengthening monetary policy framework and operations
- Institutional developments:
  - Monetary Policy Committee (MPC) operational since October 2020; supported by the Monetary and Financial Programming Committee.
- 2021 BCRG focus areas:
  - i) Strengthening the liquidity forecasting system;
  - ii) Operationalization of the emergency liquidity mechanism;
  - iii) Reform of the collateral management system, including:
    - Expanding the range of financial assets eligible as collateral.
    - Setting new discounts applicable to public instruments eligible as collateral for the BCRG's monetary policy operations;
  - iv) Active liquidity management.
- Operational steps:
  - Proceeded with reorganization of foreign exchange operations department into a Treasury department (middle office); to be made operational once the trading room is effective.
  - Operationalize emergency liquidity assistance framework with IMF technical assistance (technical assistance mission scheduled for June 2020 did not take place due to the pandemic).
  - Internal review of cash operations and vault security; initiated request with a central bank for a peer review of cash operations (program being finalized).
  - Completed external audit of monetary data of end-December 2019 by end of June 2020; external audit of end-June 2020 monetary data to be completed by mid-December 2020.

### Reserve position and FX intervention policy
- Reserve targets and recent levels:
  - Plan to maintain a reserve import coverage of 3.8 months, in line with the ARA-CC metric reserve adequacy estimate.
  - Foreign exchange reserves reached $1,330 billion at the end of June 2020 (4.1 months of import coverage).
  - Reserves declined to $1,249 billion at end-September 2020 (3.9 months of import coverage) when reserves were utilized to cope with COVID-19 pressures.
  - Aim to maintain a level of 3.8 months of imports cover by the end of 2020.
- Intervention strategy:
  - Adopted and implemented a rules-based intervention strategy (Prior Action) to reduce discretionary power of the BCRG, reduce frequency of interventions, promote transparency, and support interbank market development.
  - Rule applied since November following installation of an electronic platform enabling real-time monitoring of interbank foreign exchange transactions.

### Safeguards, audits, and governance of the central bank
- Safeguards and legal reform:
  - Continue to implement remaining recommendations of the 2018 Safeguards Assessment Update; ready to begin an assessment update.
  - Work on the revision of the law on the BCRG statute has started; objective to have it adopted in April 2021.
    - Revision aims to clarify the role of the MPC and the Board of Directors regarding foreign exchange transactions and to explicitly assign the supervisory role to the Board of Directors.
- Audit and internal controls:
  - Created an IT audit entity to better control risks from automation of operations.
  - Continuing plan to build audit capacity within the Internal Audit Department (DAI); draft DAI quality review program submitted to audit committee.
  - Intend to carry out quality review of DAI activities by end of April 2021 at the latest.
  - Risk mapping of the Central Bank carried out; action plan to cover important risks not drawn up due to time spent on training operational staff.
  - Internal audit department's intervention program developed based on most important risks.
  - Planned update of risk mapping between March and November 2020 could not be carried out due to containment.
  - External audit of end-June 2020 monetary data to be completed by mid-December 2020.

### Banking sector stability and supervision
- Chart of accounts and implementation timeline:
  - Gradual implementation of the new chart of accounts and banking framework; work to codify accounting situations and prepare concordance table.
  - Outreach workshop organized in February 2020 to assist banks.
  - Banks have until November 1, 2021 to perform all necessary due diligence for effective implementation of the new chart of accounts.
- Regulatory and supervisory reforms:
  - Strengthen banking supervision by implementing most of the Basel II / III provisions by the end of 2021, with IMF technical assistance.
  - Plan to adopt IFRS for banks with technical assistance from the IMF and other partners.
  - Plan to put in place a bank resolution framework by September 2021, with IMF technical assistance.
- Deposit guarantee and compliance:
  - Deposit guarantee system is operational; Board of Directors set the depositors' compensation ceiling and annual contribution rates; first contributions made in 2019.
  - Complete the fund’s regulatory framework with IMF technical assistance.
- Capital adequacy and supervisory actions:
  - At the end of June, two small banks were in breach of the minimum capital adequacy requirement (net equity); combined market share of less than 3 percent.
    - One bank is not authorized to take deposits and is not a major concern.
    - BCRG invited the second bank to raise capital to regulatory level by the end of 2020; may put the bank under close surveillance and initiate an on-site control mission after the state of health emergency ends.
  - BCRG will ensure all banks comply with the minimum capital requirement.

### Structural reforms — overarching commitment
- Commitment to pursue key structural reforms to support stronger and more inclusive growth, including:
  - Continuing reforms in public financial management.
  - Supporting private sector development and improving the business climate.
  - Strengthening governance.

### Revenue mobilization reforms and tax administration
- DNI and digitalization:
  - Progress in operationalizing new organizational structure of the DNI.
  - Set up the online tax declaration and payment system (E-tax) in September 2020; will operationalize it for all taxpayers at the end of March 2021.
- Legal and technical assistance:
  - Revising the General Tax Code (CGI) with IMF technical assistance.
  - Ministry of Mines developed a model for forecasting mining revenues with external experts; model to be finalized with IMF and other partners and specialist firms.
- Medium-term revenue measures (from MEFP fourth review under the ECF):
  - Measures include rationalization of ad-hoc exonerations; broadening the base for the insurance tax; increasing tax collection through general and desk audits; collection of recoverable tax arrears; tax recovery from matching of tax and customs databases; operationalization of the one-stop shop; strengthening collection of the single land contribution; operationalization of the new DNI organizational structure.
- Mining sector revenue policy:
  - Committed to applying fiscal provisions of the 2013 mining code and other applicable laws to mobilize mining revenues.
  - Ensure all new mining agreements and renewals are brought into compliance with the 2013 Mining Code and that agreements providing for new infrastructure investments and/or local transformation be submitted to the National Assembly with an assessment of tax expenditures.
  - DNI to receive technical assistance from GIZ and the OECD (transfer pricing and others).
  - Strengthen tax audits in sectors exposed to tax evasion to increase mining sector contribution to tax revenues.

### Public finances, transparency, and public investment management
- COVID-19 related PFM and transparency measures:
  - Increased transparency with publication of monthly reports on execution of COVID expenses; MEF published reports through October 2020 with breakdowns by source and spending by target.
  - System established to centralize external and national resources under joint decrees A / 2020/1635 / MEF / MB / CAB and A / 2020/1636 / MEF / MB / CAB / DNTCP of May 26, 2020.
  - Created a dedicated account through the treasury single account at the BCRG to receive and disburse COVID-19 funds.
  - Advance decree opening expenditure credits for the response plan signed in July 2020; plan to regularize all expenses executed within the plan and report regularly on regularization progress.
  - With IMF technical assistance, apply strict measures to ensure application of agreed mechanism for executing COVID-related operations and regularization of expenses.
- Oversight and audits:
  - General Inspectorate of Finance to carry out ex post verification of high-risk expenditure with civil society participation; first exercise began on August 17 covering operations from April to July 2020; draft report sent end of October for adversarial procedure; final report to ministers in mid-December; to be published on MEF website.
  - Publish on MEF and Ministry of Budget websites all contracts awarded for COVID-19 projects, including names of entities; work to include beneficial owners is being finalized. To date, 9 public contracts for the Ministry of Health have been published.
  - Court of Audit will perform a full audit of COVID-19 spending (including ex post validation of goods and services purchased), to be published online by June 2021.
- Public investment management:
  - Installed electronic platform for integrated investment management (Integrated Project and Results Management System).
  - Manual for preparation, appraisal and selection of investment projects not yet adopted due to COVID delays; expected adoption by end of December 2020 after Cabinet consideration.
  - Manual will require major public investment projects be accompanied by rigorous feasibility studies; Ministry of Planning to oversee projects.
- Treasury single account (TSA) and procurement:
  - Finalized TSA agreement in May 2020; extended coverage to 89 percent of all public accounts other than regional government, local communities, and externally financed development projects.
  - New public procurement code published; revised code and application texts and most public procurement management tools validated and in force since September 1, 2020.
  - Staff of procurement units strengthened; MEF installed public procurement controllers with contracting authorities.
  - Manual of procedures relating to control, award and regulation of public contracts to be adopted at end of December 2020.
- Debt management capacity:
  - Committed to strengthening debt management capacity to preserve medium-term debt sustainability and keep Guinea’s moderate risk of external debt distress from worsening.
  - Operationalize Debt Management and Financial Analysis System (DMFAS) by end of June 2021; DMFAS financed by Agence Française de Development.
  - Conduct diagnostic of institutional framework and adopt functional reorganization mechanism by December 2020 to reduce number of entities involved in debt management and strengthen efficiency, effectiveness, and coordination.

### Domestic borrowing strategy
- Treasury bond issuance:
  - Plans to complete a two-year Treasury Bond issuance on a regular basis postponed due to pandemic turbulence.
  - Intend to start cautiously before March 2021 with issuance of modest amounts of GNF 150 to 200 billion to create the market and gradually develop the yield curve.

### Governance, anti-corruption, and AML/CFT reforms
- Anti-corruption institutional strengthening:
  - Determined to strengthen legislative and institutional anti-corruption framework.
  - Committed to improving capacity, independence, and financial autonomy of the ANLC.
  - Reviewing coherence of legal framework for criminalizing acts of corruption to ensure alignment with the United Nations Convention against Corruption (UNCAC).
  - Launched second round of UNCAC with UNODC assistance; process delayed due to pandemic restrictions.
- Asset declaration regime:
  - Decree implementing asset declaration regime for senior officials adopted in March 2020 (end September 2019 SB).
  - Draft asset declaration form reflecting decree provisions published on Court of Audit website (prior action), with World Bank technical assistance.
  - 2021 budget law will allocate resources for the Court of Audit to set up logistical structure for management and control of declarations and sanctions.
  - Expect first declarations in early 2021 and subsequent publication in the Official Gazette as required by the Constitution.
- AML / CFT framework:
  - Adopted law on prevention and repression of terrorism in July 2019.
  - Appointed magistrates responsible for investigating financial crimes and money laundering in October 2019.
  - Finalized draft of new AML / CFT law in April 2020 with IMF technical assistance; bill under review for consistency with national legislation; intended submission to Council of Ministers in November 2020 and presentation to National Assembly thereafter.
  - Risk-based AML / CFT supervision framework for the banking sector operational since October 2019; AML / CFT rating system for banks put in place with IMF technical assistance.
  - Execution of program slowed by suspension of IMF missions due to the health crisis.

*Source: IMF country report text provided.*

### 48.      We are determined to continue strengthening the business climate in order to promote

### 1ginea2020005 - 48.      We are determined to continue strengthening the business climate in order to promote

### Business climate and trade facilitation
- Operationalization in April 2020 of the second phase of the one-stop shop for international trade (GUCEG) with extension to:
  - the Port of Conakry,
  - the Gbessia International Airport,
  - and gradual extension to the land borders.

### Financial inclusion and private sector support
- Financial inclusion diagnostic carried out in November 2018 with support from the World Bank.
- National strategy for inclusive finance is being finalized with World Bank support and will be adopted in 2020.
- Two funds established to assist companies hit by the crisis:
  - Support Fund for Economic Interest Groups and Enterprises (FAGIEE):
    - Objective: provide loans at a subsidized rate of 5 percent to enterprises and operators in the informal sector particularly affected by COVID-19.
    - Supervision: placed under the supervision of the Ministry of Economy and Finance.
    - Governance: a steering committee decides on loan applications examined by the banks.
    - Status: At the end of September 2020, requests for assistance for a cumulative amount of GNF 50 billion were submitted to the steering committee for decision.
  - Business Loan Guarantee Fund (FGPE SA):
    - Objective: provide guarantees and other financial products to financial institutions to facilitate SMEs' access to financing.
    - Capital: GNF 50 billion.
    - Supervision: subject to BCRG supervision.
    - Operationalization: underway with technical and financial assistance from the IFC/World Bank.
    - Government commitment: expected to release the subscribed capital by the end of November 2020.

### Statistical capacity and national accounts
- Commitment to provide adequate resources to the National Statistical Institute (INS) to strengthen the statistical system.
- Move national accounts methodology from SNA 1993 to SNA 1998 by June 2021.
- Ensure operationalization of the macroeconomic framework committee to harmonize statistical data.
- Strengthen methodology for calculating the Harmonized Consumer Price Index and publish the new index by the end of 2021.
- Action on artisanal mining: in view of the sharp increase in artisanal gold shipments observed in mid-2020, measures will be taken to reconcile the treatment of artisanal mining activity (gold and diamonds) in national accounts with reported exports in the balance of payments, with IMF technical assistance.

### Quantitative performance criteria and indicative targets (high-level)
- Table 1 presents program quantitative performance criteria and indicative targets (Billions of Guinean Francs; unless otherwise indicated), including:
  - Performance criteria: floor on the basic fiscal balance of the central government; ceiling on net domestic assets of the central bank; ceiling on net central government budgetary borrowing from the central bank; floor on net international reserves of the central bank.
  - Continuous performance criteria: ceiling on new non-concessional external debt contracted or guaranteed by the central government or the central bank; zero ceiling on new external arrears of the central government and the central bank.
  - Indicative targets: floor on tax revenues collected; floor on domestically-financed social safety nets program; ceiling on new domestic arrears accumulated by the central government (net).
- Selected program table values and status highlights (as shown in Table 1):
  - At end-September 2020: requests for FAGIEE assistance cumulative amount GNF 50 billion (submitted to steering committee).
  - FGPE SA capital: GNF 50 billion; government expected to release subscribed capital by end of November 2020.
  - Continuous performance criterion ceiling on new non-concessional external debt (cumulative) limited to US$650 million for the arrangement.
  - Memorandum item: program exchange rate definitions and valuation conventions described (see Technical Memorandum).

### Structural benchmarks, prior actions, and implementation status
- Prior actions met:
  - Submission to Parliament of a 2020 Supplementary Budget Law aligned with program commitments.
  - Implementation of rules-based FX intervention policy; electronic trading platform operational and instruction published on central bank website.
  - Development and publication of an asset declaration form in line with the decree on the asset declaration regime (prior action noted as Met in an earlier instance).
- Structural benchmarks and status examples:
  - Prepare and adopt a manual for preparation, appraisal and selection of investment projects (End May-2020): Not met. A draft decree on regulatory framework was developed with AFW TA.
  - Ministerial order to increase electricity tariffs by 9 percent for households and by 10 percent for professionals and industrials in 2020 (June 1, 2020): Not met. Draft decree prepared; signature postponed due to COVID.
  - Mining agreements: Continuous benchmark met. A new iron ore extraction agreement ratified in July 2020 with new investments in infrastructure and local transformation; submitted to the National Assembly with an assessment of tax expenditures.
  - Develop and publish an asset declaration form (End June 2020): Not met. Draft decree on content being finalized with World Bank support.

### Technical Memorandum highlights — program definitions and exchange rates
- Program valuation rules:
  - For program purposes, assets, liabilities, and flows denominated in foreign currency at the Central Bank are valued at the “program exchange rate” except items affecting government budgetary accounts (measured at current exchange rates).
  - Program exchange rate corresponds to the accounting exchange rate of the GNF prevailing on December 31, 2016.
  - Gold holdings valued at the gold price in effect on December 30, 2016: US$1159.10 per oz.
- Program Exchange Rates, Guinean Franc per Foreign Currency and Gold Price (rates and prices as of end-December 2016):
  - Gold bullion LBM US$/troy ounce: 1159.10
  - Euro to US$ exchange rate: 0.95
  - Yen to US$ exchange rate: 116.80
  - Sterling UK to US$ exchange rate: 0.81
  - Yuan to US$ exchange rate: 6.95
  - Guinean Franc to US$ exchange rate: 9225.31
  - Guinean Franc to SDR exchange rate: 12362.72
- Definitions and measurement guidance summarized for program monitoring:
  - Net domestic assets (NDA) of the BCRG = reserve money − net foreign assets (NFA) of the BCRG, both calculated at the program exchange rate.
  - Reserve money includes local banks’ deposits and other private sector deposits with the BCRG (including bank reserve requirements) denominated in GNF and foreign currencies; GNF in circulation; GNF in vaults of local banks. Foreign currency amounts converted at the program exchange rate.
  - Net International Reserves (NIR) of the BCRG = gross reserve assets − gross foreign exchange liabilities of the BCRG. Gross reserve assets and gross foreign exchange liabilities are precisely defined and exclude/ include specific items as listed in the Technical Memorandum.
  - Net borrowing of the central government from the Central Bank is defined as BCRG claims on the central government minus total government deposits at the BCRG and amounts related to recapitalization of the central bank.
  - Non-concessional external debt: debt with grant element less than 35 percent (grant element calculated using a discount rate of 5 percent). The cumulative ceiling of US$650 million applies from the start of the arrangement and is monitored continuously; for program monitoring, non-concessional external debt is deemed contracted or guaranteed at the date of its signature.
  - The definition of the central government excludes local governments, the Central Bank of the Republic of Guinea (BCRG), and public entities with autonomous legal personality, unless otherwise indicated.

*Sources: Guinean authorities; and IMF staff estimates and projections.*

### 15. Excluded from the limit on non-concessional external debt is the following: (i) the use of

### 1ginea2020005 - 15. Excluded from the limit on non-concessional external debt is the following: (i) the use of

### Exclusions from the limit on non-concessional external debt
- Excluded items:
  - (i) the use of IMF resources;
  - (ii) debts classified as international reserve liabilities of the BCRG;
  - (iii) the non-concessional loan that the government is contracting to finance the Souapiti dam project;
  - (iv) debt that is non-concessional upon signature but later cancelled or renegotiated to be made concessional, once such cancellation or renegotiation becomes effective in accordance with the terms of the relevant contract and as determined by the law applicable to such contract;
  - (v) any Guinean francs denominated government security holdings by non-residents.

### Ceiling on New External Arrears of the Central Government and Central Bank
- New external arrears definition for the program:
  - Debt defined in paragraph 14 of the TMU; debt is external when contracted with a non-resident.
  - For the PC on non-accumulation of new external payment arrears, arrears are defined as external debt obligations contracted or guaranteed by the central government or the BCRG that have not been paid when due in accordance with the relevant contractual terms (taking into account any contractual grace periods).
  - This PC excludes arrears on external financial obligations of the government subject to rescheduling.

### Definitions of debt instruments (program context)
- Debt instruments and transactions covered (as described in the source):
  - (i) deposits, bonds, debentures, commercial loans, and buyers’ credits, and temporary exchanges of assets equivalent to fully collateralized loans (such as repurchase agreements and official swap arrangements);
  - (ii) suppliers’ credits (contracts where the supplier permits the obligor to defer payments until sometime after delivery of goods or services);
  - (iii) leases (arrangements under which property is provided for specified period(s) shorter than total expected service life, with title retained by the lessor).

### Floor on Tax Revenues Collected
- Floor definition:
  - The floor on total domestic central government tax revenue is defined as total central government revenue, as presented in the central government financial operations table (TOFE), excluding external grants and non-tax revenue, defined as such in the TOFE.

### Domestically-Financed Social Safety Nets Programs
- Definition of domestically-financed social safety nets programs (domestically-financed spending disbursed to support):
  - (i) all domestically-financed non-contributory social programs under the Programmes Filets Sociaux Productifs (PFSP);
  - (ii) the budgetary allocation to the Ministry of Social Action and Women Promotion and Infancy, including all non-contributory social programs under the Social Development Fund;
  - (iii) transfers to public administrative entities conducting activities aimed at protecting the most vulnerable, including the activities of National Fund for Youth Placement (FONIJ, of the Center for Women Autonomy, and schooling of children with handicaps;
  - (iv) targeted health activities, notably medical coverage for the poor, free medical procedures, support to individuals with infectious diseases;
  - (v) targeted activities in education, notably provision of school meals and health support;
  - (vi) scholarship to students to improve living conditions.

### New Domestic Arrears Accumulated by the Central Government (Net)
- Definition:
  - Domestic arrears are spending recorded by the public accountants of the Treasury as due by the central government and which have not been paid, including checks that were issued but not yet cashed.

### New Concessional External Debt Contracted or Guaranteed by the Central Government or Central Bank (cumulative)
- Concessional debt definition for program purposes:
  - A debt is considered concessional if it includes a grant element of at least 35 percent (paragraph 14 for definition of grant element).
  - The memorandum item is new concessional loans contracted or guaranteed by the central government or the central bank from the start of the arrangement, recorded on a cumulative basis.
  - For program monitoring purposes, concessional external debt is deemed to be contracted or guaranteed at the date of its signature.

### Adjustment Factors for Program Performance Criteria
- Adjustor for Basic Fiscal Balance (floor adjustments):
  - Upward by an amount equal to 40 percent of the shortfall of external program loans and external program grants compared to programmed amounts, as specified in Table 1.
  - Downward by an amount equal to 40 percent of the surplus of external program loans and external program grants compared to programmed amounts, as specified in Table 1.
- Adjustor for Net International Reserves (floor adjustments):
  - Downward by an amount equal to 60 percent of the U.S. dollar equivalent of the cumulative shortfall of external program loans and external program grants of the central government as specified in Table 1;
  - Upward by an amount equal to 60 percent of the U.S. dollar equivalent of the cumulative surplus of external program loans and external program grants of the central government as specified in Table 1.
- Adjustor for Net Domestic Assets of the Central Bank (ceiling adjustments):
  - Upward by an amount equal to 60 percent of the Guinean Franc equivalent (calculated at the program exchange rate) of the cumulative shortfall in external program loans and external program grants compared to programmed amounts as specified in Table 1;
  - Downward by an amount equal to 60 percent of the Guinean Franc equivalent (calculated at the program exchange rate) of the cumulative surplus of external program loans and program grants compared to programmed amounts as specified in Table 1.
- Adjustor for Net Government Budgetary Borrowing from the Central Bank (ceiling adjustments):
  - Upward by an amount equal to 60 percent of the Guinean Franc equivalent (calculated at the program exchange rate) of the cumulative shortfall in external program loans and external program grants compared to programmed amounts as specified in Table 1;
  - Downward by an amount equal to 60 percent of the Guinean Franc equivalent (calculated at the program exchange rate) of the cumulative surplus of external program loans and program grants compared to programmed amounts as specified in Table 1.

### Monitoring and Reporting Requirements
- Performance monitoring: authorities to supply data to IMF as outlined in the data reporting table; authorities will transmit promptly any data revisions and other information necessary to monitor the arrangement.
- Key reporting frequencies and deadlines (selected items):
  - Central bank balance sheet, consolidated commercial bank balance sheet, monetary survey: Monthly — 30th of the month for the previous month.
  - Detailed net treasury position (NTP) and net government position (NGP): Monthly — 30th of the month for the previous month.
  - Interest rates and stock of government and central bank securities (BDT and TRM): Monthly — 30th of the month for the previous month.
  - Prudential indicators for commercial banks: Quarterly — One month after the end of the quarter.
  - General Treasury balances (TOFE): Monthly — 30th of the month for the previous month.
  - New mining contracts and revised expiring contracts, including annexes with tax provisions: Quarterly — One month after the end of each quarter.
  - Debt service due, debt service paid, debt service reconciliation table, end-of-month outstanding debt and stock of daily debt service outstanding and unpaid, stock of arrears according to the program definition, new signed loans and drawings on new loans: Monthly — 30th of the month for previous month’s data.
  - Disbursements of external grants and loans: Quarterly — Quarterly. 30th of the last month of the quarter for previous quarter’s data.
  - Consumer price index, Conakry: Monthly — 30th of the month for previous month’s data.
  - National accounts: Annual — Summary estimates: nine months after the end of the year.
  - Consolidated balance of payments estimates: Annual — Summary estimates: six months after the end of the year.

### Debt Sustainability Analysis (summary findings)
- Risk assessments:
  - Risk of external debt distress: Moderate.
  - Overall risk of debt distress: Moderate.
  - Granularity in the risk rating: Limited space to absorb shocks.
  - Application of judgment: Yes.
- Key conclusions:
  - All external debt burden indicators under the baseline scenario, which accounts for the negative impact of the COVID-19 pandemic, lie below their policy-dependent thresholds.
  - Stress tests suggest that debt vulnerabilities will increase if adverse shocks materialize.
  - Under the most extreme stress tests, all solvency and liquidity indicators breach their thresholds for prolonged periods.
  - The overall risk of public debt distress is assessed to be moderate, with the application of judgement regarding a brief and marginal breach for the PV of total-public-debt-to-GDP ratio over 2021–22, reflecting additional borrowing in 2020 to meet urgent balance of payments and fiscal needs due to the COVID-19 pandemic, and the one-off impact of the recapitalization of the central bank.
  - The assessment hinges on commitments to moderate the increase in the envelope of public investment projects over 2020-23 with respect to the plans included in the March 2020 DSA at the time of the Fourth Review under the ECF arrangement.
  - Policy recommendations: A prudent external borrowing strategy aimed at maximizing the concessionality of new debt, strengthening debt management and enhancing public investment management will be key to preserving medium-term debt sustainability.

### Coverage of Public Debt (DSA definitions and assumptions)
- Public debt coverage:
  - Definition covers central government debt, central government-guaranteed debt, and central bank debt contracted on behalf of the government.
  - Audited and validated arrears to suppliers over 1982–2013 and domestic arrears accumulated in 2017-18 and decumulated in 2019 included in baseline, corresponding to a domestic arrears stock of about 1.5 percent of GDP at end-2019.
  - The definition of PPG external debt used in the DSA includes the loan for the Souapiti dam (US$1.2 billion, about 10 percent of 2018 GDP) signed on September 4, 2018.
  - The grant element of the Souapiti loan is estimated to be 29 percent.
  - The Souapiti dam loan is not included in the public investment of the central government as it will be carried out by a Special Purpose Vehicle (SPV) jointly owned by the Guinean government (51 percent) and China International Water & Electricity Corporation (49 percent) that is not considered as part of the central government. The SPV will manage and operate the dam on a commercial basis and will be responsible for servicing the loan.
- Contingent liability and additional items (Table 1 summary):
  - SoE's debt (guaranteed and not guaranteed by the government) 1/2 percent of GDP 2.0
  - PPP 35 percent of PPP stock 1.3
  - Financial market (default value) 5 percent of GDP 5.0
  - Total (2+3+4+5) (in percent of GDP) 8.3
  - Note: The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country's public debt definition (1.). If it is already included in the government debt (1.) and risks associated with SoE's debt not guaranteed by the government is assessed to be negligible, a country team may reduce this to 0%.

### Recent Debt Developments (selected statistics)
- End-2019 levels:
  - Total public debt: US$4.9 billion (36.5 percent of GDP) at end-2019 compared with US$4.6 billion (37.7 percent of GDP) in 2018.
  - External public debt: US$2.6 billion (19.5 percent of GDP) at end-2019 from US$2.3 billion (18.9 percent of GDP) at end-2018.
  - Domestic debt: US $2.3 billion at end-2019 (decline from 18.8 percent of GDP at end-2018 to 17.0 percent of GDP at end-2019) — driven by a large net decumulation of domestic arrears offset by strong net issuance of Treasury instruments.

*Prepared by the International Monetary Fund and the International Development Association.*

### 3.      Key assumptions are consistent with the macroeconomic framework outlined in the Staff

### 3.      Key assumptions are consistent with the macroeconomic framework outlined in the Staff

### Growth, inflation, and macro outlook
- Real GDP growth is estimated at 5.2 percent in 2020.
- Growth is expected to strengthen to 5.5 percent in 2021 and converge to 5 percent by 2023.
- Risks to the outlook are tilted to the downside: socio-political tensions following the Presidential election, delays in reform implementation, and potential deterioration of the sanitary situation depending on the evolution of the pandemic.
- Upside risk: mining production capacity coming on stream faster than currently expected.
- Inflation is expected to rise to 10.2 percent (y-o-y) in 2020 and gradually decrease to below 8 percent over the medium term, reflecting a prudent monetary policy stance.

### Fiscal balance and public investment
- The primary fiscal balance recorded a deficit of 0.3 percent of GDP in 2018 and was virtually eliminated in 2019.
- The primary deficit is expected to reach 2.7 percent of GDP in 2020.
- The basic fiscal balance is projected to improve from a deficit of 2.3 percent of GDP in 2020 to an average surplus of 0.7 percent of GDP during 2021–25.
- The pandemic deteriorated the basic balance by nearly 3 percent of GDP.
- Authorities rephased non-priority externally financed public investments, reducing them by about 2 percent of GDP in 2020.
- The primary deficit is expected to average 1.3 percent of GDP over 2021–25.
- To preserve debt sustainability, only a limited share of planned, but not-yet-contracted external project financing in 2021-23 will be undertaken.
- Continued revenue mobilization is expected to gradually increase tax revenue by 2.9 percent of GDP over 2021–30.
- Grants rose to 2.1 percent of GDP in 2020 and are expected to return to about 1.0 percent of GDP on average over 2021–23.

### External sector, financing mix, and terms
- Current account (including transfers) recorded a deficit of 13.7 percent of GDP in 2019 and is expected to decrease to 12.3 percent of GDP in 2020.
- The current account is expected to average a deficit of 11.5 percent of GDP over 2021–25.
- New external borrowing:
  - 2.4 percent of GDP in 2019.
  - Expected to rise to 6.4 percent of GDP in 2020.
  - Average 6.1 percent of GDP over 2021–22.
  - Baseline assumes about 3.0 percent of GDP per year over 2023–29.
  - Baseline assumes about 2.5 percent of GDP per year over 2030–39.
- Average grant element of new borrowing:
  - About 33.1 percent in 2020.
  - Gradually increasing to about 41 percent in 2024.
  - Gradually decreasing to 25 percent by 2040 (long term assumption).

- Non-concessional borrowing:
  - Souapiti dam loan disbursements expected: US$300 million in 2020, US$576 million in 2021, and US$300 million in 2022.
  - DSA incorporates non-concessional borrowing of US$658 million to be disbursed over 2019–23.
  - Of the US$598 million signed in September 2018 for RN1 and Conakry urban road: US$45 million disbursed in 2019 and US$149 million expected in 2020; remaining amount spread over 2021-23.
  - Non-concessional loan of US$60 million from Qatar signed in November 2018 and disbursed in April 2019.
  - Additional non-concessional borrowing of about US$240 million assumed disbursed during 2023–25.

- Concessional borrowing:
  - World Bank concessional budget support: US$91.5 million in 2019, US$70 million in 2020, and US$40 million per year over 2021–25.
  - Concessional project loans assumed to total US$2.5 billion over 2020–25, of which about US$550 million is expected from the World Bank.

- Pandemic-related support:
  - Program loans in support of the COVID-19 response plan expected to reach 1.7 percent of GDP in 2020, including resources from the World Bank, the African Development Bank, and the IMF’s RCF.

- Pandemic-related debt service relief:
  - Assumes Guinea will receive grants covering its debt service payments to the IMF falling due between April 14, 2020 and April 13, 2022 (SDR 69.2 million), subject to availability of CCRT resources.
  - Includes assumption that US $32.2 million in debt service payments falling due in 2020 will be rescheduled to 2022-24 under the DSSI.
  - Does not incorporate the DSSI extension until June 30, 2021 announced by the G20 in October 2020.
  - Preliminary estimate of eligible debt service falling due in 2021 that could be rescheduled by the DSSI extension is US$20.1 million.

### Domestic borrowing and arrears clearance
- Net government domestic financing expected to be negative throughout 2019–25:
  - -1.1 percent of GDP in 2019.
  - -0.1 percent of GDP in 2020.
  - Averaging -0.4 percent of GDP for 2021-25.
- Amortization of securitized debt to domestic suppliers will average 0.5 percent of GDP over 2020-22.
- Repayment of domestic arrears accumulated during 2017-18 expected to average 0.1 percent over 2020-22.
- In 2019, issuance of domestic debt to commercial banks included:
  - 1 percent of GDP in 3-year debenture loans (12% interest rate).
  - 0.5 percent of GDP in Treasury bills of less than 12-month maturity (effective interest rate of 9.7%).
- Net domestic borrowing is expected to turn positive in the long term.
- An audit of domestic arrears covering 2014-18 is being planned; work delayed by the pandemic.

### Realism of assumptions and growth drivers
- Growth of 5.2 percent in 2020 would make Guinea one of the world’s fastest-growing economies in 2020; projection reflects strong mining sector performance (bauxite demand from China and artisanal gold).
- The 5.5 percent growth projection for 2021 assumes a further recovery of external demand consistent with the October 2020 WEO.
- Execution of public investment plans assumed heavily curtailed in 2020, then rising gradually in 2021 and 2022 but remaining below the pre-pandemic path.
- Framework conservatively assumes a relatively low investment-growth nexus due to Guinea’s weak historical growth outturns (Ebola, commodity price shocks, social unrest).
- Historically higher-than-projected primary fiscal deficits were the largest contributor to unexpected debt accumulation over the past five years.

### Debt structure and key external debt figures (selected items from Table 2)
- Total (end-2018): USD 2,288.9 million; Percent of Total 100.0; Percent of GDP 18.9.
- Total (end-2019): USD 2,625.8 million; Percent of Total 100.0; Percent of GDP 19.5.
- Total incl. C2D (end-2018): USD 2,355.4 million; Percent of Total 102.9; Percent of GDP 19.5.
- Multilateral creditors (end-2018): USD 1,116.1 million; Percent of Total 48.8; Percent of GDP 9.2.
- IMF (end-2018): USD 322.3 million; Percent of Total 14.1; Percent of GDP 2.7.
- World Bank (end-2018): USD 341.4 million; Percent of Total 14.9; Percent of GDP 2.8.
- Official Bilateral Creditors (end-2018): USD 1,112.0 million; Percent of Total 48.6; Percent of GDP 9.2.
- China (end-2018): USD 629.8 million; Percent of Total 27.5; Percent of GDP 5.2.
- Commercial Creditors (end-2018): USD 60.8 million; Percent of Total 2.7; Percent of GDP 0.5.
- Arrears (end-2018): USD 149.3 million; Percent of Total 6.5; Percent of GDP 1.2.
- (Corresponding end-2019 figures also reported in table.)

### LIC DSA macroeconomic assumptions (selected entries from Table 4)
- Nominal GDP ($ Million): 2018: 12,181; 2019: 11,379; 2020: 14,244; 2025: 20,343; 2030: 28,580.
- Real GDP (percentage change): 2018: 6.2; 2019: 5.6; 2020: 1.4; 2025: 5.0; 2030: 5.0.
- Revenues (Percent of GDP): 2018: 13.1; 2019: 13.7; 2020: 12.3; 2025: 16.0; 2030: 16.9.
- Grants (Percent of GDP): 2018: 1.1; 2019: 0.3; 2020: 1.2; 2025: 0.9; 2030: 0.9.
- Public Sector Expenditure (Percent of GDP): 2018: 15.6; 2019: 14.6; 2020: 17.3; 2025: 19.0; 2030: 19.7.
- Capital expenditure and net lending (Percent of GDP): 2018: 5.1; 2019: 3.7; 2020: 4.9; 2025: 7.6; 2030: 8.2.
- Primary Fiscal Balance (Percent of GDP): 2018: -0.3; 2019: 0.0; 2020: -3.0; 2025: -1.1; 2030: -0.9.
- New external borrowing (Percent of GDP): 2018: 1.3; 2019: 4.9; 2020: 11.9; 2025: 3.0; 2030: 2.7.
- Grant elements of new external borrowing (Percent): 2018: 31.2; 2019: 31.7; 2020: 32.1; 2025: 39.9; 2030: 38.2.
- Exports of goods and services (Percent of GDP): 2018: 32.9; 2019: 30.5; 2020: 27.8; 2025: 32.1; 2030: 32.8.
- Imports of goods and services (Percent of GDP): 2018: 46.8; 2019: 39.4; 2020: 43.0; 2025: 38.1; 2030: 35.1.
- Current account (including transfers) (Percent of GDP): 2018: -19.0; 2019: -13.9; 2020: -21.1; 2025: -10.0; 2030: -7.0.
- Foreign direct investment (Percent of GDP): 2018: 12.9; 2019: 12.9; 2020: 8.3; 2025: 7.4; 2030: 7.4.

### Country classification, stress tests, and risk assessment
- Composite Indicator (CI) for Guinea is 2.44 based on the October 2020 WEO vintage and the 2019 CPIA index update, classifying Guinea at weak debt-carrying capacity.
- Two tailored stress tests are triggered: a contingent liabilities stress test and a commodity prices stress test.
- A contingent liabilities shock captures SOEs’ external debt default, PPPs’ distress and/or cancellations, and financial market vulnerabilities amounting to 8.3 percent of GDP.
- Two fully customized scenarios performed: a weak policy scenario and higher non-concessional borrowing.

- External debt risk:
  - Guinea stands at moderate risk of external debt distress with limited space to absorb shocks.
  - PV of external debt-to-GDP expected to peak at 21.8 percent of GDP in 2023 (slightly below the June 2020 DSA peak) and then decline.
  - Under the most extreme stress tests, all indicators breach their thresholds.

- Total public debt risk:
  - Overall risk of debt distress assessed as moderate, applying staff judgement.
  - PV of total public debt-to-GDP ratio peaks in 2021 at 35.4 percent of GDP (benchmark 35 percent of GDP).
  - Breach is marginal and temporary (two years).
  - Recapitalization of the central bank in 2018 contributed to the peak; recapitalization executed via 30-year bonds with no payment expected until 2046.

- Stress-test scenarios described:
  - Most extreme stress test: export shock setting export growth to historical average minus one standard deviation in years 2 and 3 for PV debt-exports and debt service-to-exports; combined shocks for PV debt-to-GDP and non-debt creating flow shock for debt service-to-revenue.
  - Weak policy scenario: real GDP growth 1 percentage point below baseline over 2021–40 and fiscal balance 0.5 percent of GDP looser than baseline in 2021–23.
  - Higher non-concessional loans scenario: additional non-concessional borrowing of US$350 million to be disbursed during 2021–23 on top of baseline.

- Constraints and limited space for additional borrowing, especially near term; potential worseners include a more protracted pandemic, delays in repaying domestic arrears or debt owed to the BCRG, higher-than-anticipated borrowing, or audits confirming higher domestic arrears.

*Source: Staff Report for the Combined Fifth and Sixth Review under the Three-Year Extended Credit Facility (excerpt).*

### 7.      The authorities broadly agreed with the conclusions of the DSA. They underscored their

### 1ginea2020005 - 7.      The authorities broadly agreed with the conclusions of the DSA. They underscored their

### Authorities' response and policy commitments
- The authorities broadly agreed with the conclusions of the DSA.
- Commitment to maintaining a sustainable level of debt that does not exceed a moderate risk of debt distress.
- Importance of maximizing concessional borrowing where possible, while noting concessional financing is not available at the scale needed for large infrastructure needs.
- Commitment to:
  - Gradually clear domestic arrears to the private sector.
  - Strengthen debt management.
  - Enhance public investment management.

### External Debt Sustainability Framework — baseline projections and key indicators (Table 6)
- External debt (nominal) (Percent of GDP): 2017: 19.3; 2018: 18.9; 2019: 19.5; 2020: 23.8; 2021: 28.4; 2022: 30.6; 2023: 31.1; 2024: 31.1; 2025: 31.1; 2030: 29.7; 2040: 26.1; (additional entries) 25.2; 29.8.
- of which: public and publicly guaranteed (PPG): same values as external debt above.
- Change in external debt: -2.5; -0.4; 0.5; 4.4; 4.6; 2.2; 0.5; 0.1; 0.0; -0.4; -0.1.
- Identified net debt-creating flows: -9.3; 2.5; -1.2; 0.9; 5.7; 2.6; 1.3; 0.9; 1.4; -4.0; -6.6; 6.3; -0.5.
- Non-interest current account deficit: 6.8; 20.2; 13.8; 12.3; 14.0; 11.7; 10.7; 9.5; 10.0; 4.6; 1.9; 15.4; 8.4.
- Deficit in balance of goods and services: 7.4; 14.5; 9.3; 7.4; 8.0; 6.5; 5.9; 4.3; 4.3; -1.3; -6.7; 12.8; 3.2.
- Exports (percent of GDP or level indicated in table): 39.9; 33.5; 30.0; 32.3; 31.9; 31.9; 32.6; 33.9; 33.7; 34.4; 35.6.
- Imports: 47.3; 48.0; 39.3; 39.8; 39.8; 38.4; 38.6; 38.2; 38.0; 33.1; 28.9.
- Net current transfers (negative = inflow): -0.9; -0.6; -0.5; -1.4; -0.5; -0.5; -0.7; -0.6; -0.6; -0.2; 0.1; -2.3; -0.5.
- Net FDI (negative = inflow): -12.6; -15.1; -12.9; -10.7; -7.3; -8.1; -8.4; -7.6; -7.6; -7.6; -7.6; -8.1; -7.9.
- Endogenous debt dynamics contribution (percent of GDP or ratio): -3.5; -2.6; -2.1; -0.7; -1.0; -1.0; -1.0; -1.0; -1.0; -1.0; -0.9 (broken down by components):
  - Contribution from nominal interest rate: 0.2; 0.3; 0.1; 0.2; 0.3; 0.3; 0.4; 0.4; 0.4; 0.4; 0.3.
  - Contribution from real GDP growth: -1.9; -1.0; -0.9; -0.9; -1.2; -1.4; -1.4; -1.4; -1.4; -1.4; -1.2.
  - Contribution from price and exchange rate changes: -1.8; -1.9; -1.3 (table fragmented beyond).
- Residual: 6.8; -2.9; 1.8; 3.4; -1.1; -0.4; -0.8; -0.8; -1.4; 3.6; 6.5; -9.3; 1.5.
- Sustainability indicators:
  - PV of PPG external debt-to-GDP ratio (selected projection values): 13.8; 16.8; 20.1; 21.5; 21.8; 21.7; 21.6; 20.4; 18.6.
  - PV of PPG external debt-to-exports ratio (selected): 46.0; 52.0; 63.0; 67.6; 66.7; 64.0; 64.2; 59.2; 52.1.
  - PPG debt service-to-exports ratio: 1.4; 1.7; 1.6; 1.4; 2.5; 4.2; 4.4; 4.2; 3.8; 4.4; 4.0.
  - PPG debt service-to-revenue ratio: 4.1; 4.2; 3.5; 3.5; 5.9; 9.1; 9.5; 9.2; 8.1; 9.7; 8.4.
- Gross external financing need (Billion of U.S. dollars): -0.5; 0.7; 0.2; 0.3; 1.2; 0.9; 0.7; 0.7; 0.8; -0.4; -2.5.
- Key macro assumptions:
  - Real GDP growth (in percent): 10.3; 6.2; 5.6; 5.2; 5.5; 5.2; 5.0; 5.0; 5.0; 5.0; 5.0; 6.0; 5.1.
  - GDP deflator in US dollar terms (change in percent): 8.9; 11.0; 7.2; 4.3; 1.7; 1.4; 1.9; 1.8; 1.9; 2.0; 2.0; 1.8; 2.1.
  - Effective interest rate (percent): 1.1; 1.8; 0.9; 1.4; 1.2; 1.3; 1.4; 1.4; 1.4; 1.3; 1.2; 1.1; 1.3.
  - Growth of exports of G&S (US$ terms, percent): 66.9; -1.0; 1.4; 18.3; 5.8; 6.8; 9.6; 11.0; 6.3; 7.4; 7.5; 14.3; 8.7.
  - Growth of imports of G&S (US$ terms, percent): -4.8; 19.5; -7.2; 11.0; 7.6; 2.9; 7.6; 5.8; 6.3; 5.7; 5.6; 17.9; 5.6.
  - Grant element of new public sector borrowing (in percent): 33.1; 33.5; 35.7; 38.7; 40.8; 42.8; 40.9; 24.5; ...; 39.4 (table fragmented).
  - Government revenues (excluding grants, percent of GDP): 13.7; 13.1; 13.7; 12.7; 13.4; 14.5; 15.1; 15.6; 15.9; 15.8; 16.9; 13.5; 15.0.
  - Aid flows (Billion of US$): 0.1; 0.1; 0.0; 0.6; 0.5; 0.6; 0.7; 0.7; 0.8; 1.0; 0.8.
  - Grant-equivalent financing (percent of GDP): 4.0; 3.2; 2.7; 2.3; 2.2; 2.1; 2.0; 1.5; ...; 2.4 (select entries shown).
  - Grant-equivalent financing (percent of external financing): 48.4; 41.1; 45.2; 50.6; 53.7; 56.3; 54.8; 41.9; ...; 51.9.
  - Nominal GDP (Billion of US$) (table shows intermittent values): 10; 12; 14; 15; 16; 17; 19; 20; 21; 30; 59.
  - Nominal dollar GDP growth: 20.1; 17.8; 13.3; 9.8; 7.4; 6.8; 7.0; 6.8; 6.9; 7.0; 7.0; 7.9; 7.3.
- Memorandum items:
  - PV of external debt (selected): 13.8; 16.8; 20.1; 21.5; 21.8; 21.7; 21.6; 20.4; 18.6.
  - In percent of exports (selected): 46.0; 52.0; 63.0; 67.6; 66.7; 64.0; 64.2; 59.2; 52.1.
  - Total external debt service-to-exports ratio: 1.4; 1.7; 1.6; 1.4; 2.5; 4.2; 4.4; 4.2; 3.8; 4.4; 4.0.
  - PV of PPG external debt (Billion of US$) (select): 1.9; 2.5; 3.3; 3.7; 4.0; 4.3; 4.6; 6.1; 10.9.
  - (PVt-PVt-1)/GDPt-1 (in percent): 4.7; 4.7; 2.9; 1.8; 1.4; 1.4; 1.1; 1.6.
  - Non-interest current account deficit that stabilizes debt ratio: 9.3; 20.6; 13.2; 7.9; 9.4; 9.6; 10.3; 9.4; 10.0; 4.9; 2.0.

### Public Sector Debt Sustainability Framework — baseline projections and key indicators (Table 7)
- Public sector debt (Percent of GDP): 2017: 39.5; 2018: 37.7; 2019: 36.5; 2020: 40.4; 2021: 43.2; 2022: 43.5; 2023: 42.3; 2024: 41.1; 2025: 40.4; 2030: 35.8; 2040: 28.9; additional: 42.0; 39.8.
- of which: external debt (Percent of GDP): 19.3; 18.9; 19.5; 23.8; 28.4; 30.6; 31.1; 31.1; 31.1; 29.7; 26.1; 25.2; 29.8; 20.2; 18.8; 17.0; 16.6; 14.8; 12.9; 11.2; 10.0; 9.3; 6.0; 2.9.
- Change in public sector debt: -3.0; -1.8; -1.3; 4.0; 2.7; 0.3; -1.2; -1.2; -0.8; -0.8; -0.7.
- Identified debt-creating flows: -6.0; -4.5; -4.0; -0.5; -1.4; -1.3; -1.1; -1.1; -0.8; -0.2; -0.4; -3.5; -0.8.
- Primary deficit: 1.1; 0.3; 0.0; 2.7; 1.5; 1.3; 1.3; 1.1; 1.2; 1.4; 0.7; 2.1; 1.4.
- Revenue and grants (Percent of GDP): 15.2; 14.3; 14.0; 14.6; 14.3; 15.4; 16.0; 16.5; 16.8; 16.7; 17.7; 14.8; 16.0.
- Primary (noninterest) expenditure (Percent of GDP): 16.3; 14.5; 14.0; 17.3; 15.7; 16.6; 17.3; 17.6; 18.0; 18.1; 18.3; 16.9; 17.4.
- Automatic debt dynamics: -7.1; -4.7; -4.0; -3.0; -2.5; -2.5; -2.4; -2.2; -2.0; -1.6; -1.1.
  - Contribution from interest rate/growth differential: -5.2; -3.6; -3.4; -2.6; -2.7; -2.6; -2.4; -2.2; -2.1; -1.6; -1.1.
  - Contribution from average real interest rate: -1.2; -1.3; -1.4; -0.8; -0.6; -0.4; -0.3; -0.2; -0.1; 0.1; 0.3.
  - Contribution from real GDP growth: -4.0; -2.3; -2.0; -1.8; -2.1; -2.2; -2.1; -2.0; -1.9; -1.7; -1.4.
- Other identified debt-creating flows: 0.0; 0.0; 0.0; -0.2; -0.3; -0.1; 0.0; 0.0; 0.0; 0.0; 0.0; -2.8; -0.1.
- Residual: 3.0; 2.7; 2.7; 4.0; 4.2; 1.7; -0.1; -0.1; 0.1; -0.6; -0.3; 1.0; 0.7.
- Sustainability indicators:
  - PV of public debt-to-GDP ratio (selected): 31.1; 33.9; 35.5; 35.1; 33.6; 32.3; 31.5; 27.0; 22.0.
  - PV of public debt-to-revenue and grants ratio (selected): 223.0; 232.7; 248.8; 228.4; 210.8; 195.9; 187.9; 161.7; 124.3.
  - Debt service-to-revenue and grants ratio: 6.1; 12.2; 20.5; 15.4; 19.5; 18.1; 17.3; 15.4; 13.3; 14.0; 12.4.
  - Gross financing need: 1.2; 1.2; 2.9; 4.9; 4.1; 3.9; 4.1; 3.6; 3.5; 3.7; 2.8.
- Key macro and fiscal assumptions (select):
  - Real GDP growth (in percent): same series as external DSA: 10.3; 6.2; 5.6; 5.2; 5.5; 5.2; 5.0; 5.0; 5.0; 5.0; 5.0; 6.0; 5.1.
  - Average nominal interest rate on external debt (percent): 1.1; 1.8; 0.9; 1.4; 1.2; 1.3; 1.4; 1.4; 1.4; 1.3; 1.2; 1.2; 1.4.
  - Average real interest rate on domestic debt (percent): -5.7; -6.4; -6.8; -4.9; -2.4; -1.7; -1.5; -0.5; 0.3; 5.1; 15.3; -2.2; 0.4.
  - Inflation rate (GDP deflator, percent): 10.4; 10.0; 9.3; 9.9; 8.0; 7.9; 8.1; 7.8; 7.8; 7.8; 7.8; 8.3; 8.0.
  - Growth of real primary spending (deflated by GDP deflator, percent): 22.0; -5.6; 1.6; 30.2; -4.0; 11.5; 9.0; 7.0; 7.4; 5.6; 5.3; 7.0; 7.8.
  - Primary deficit that stabilizes the debt-to-GDP ratio: 4.2; 2.0; 1.3; -1.3; -1.3; 0.9; 2.5; 2.3; 2.0; 2.2; 1.4; 2.5; 1.5.
- PV of contingent liabilities (not included in public sector debt): 0.0 across reported years.

### Stress tests, scenarios, and sensitivity analyses (Figures and Tables)
- Multiple stress tests and tailored scenarios are presented, including:
  - Historical scenario, commodity price shocks, natural disasters, market financing, combined contingent liabilities.
  - Country-specific alternative scenarios: Weak policy and Higher non-concessional borrowing (assumes additional non-concessional borrowing of US$350 million disbursed during 2021-23).
  - Sensitivity analysis tables show indicator values under Alternative Scenarios (A1, A2, A3), Bound Tests (B1–B6), and Tailored Tests (C1–C4) for years 2020–2030 across indicators such as PV of debt-to-GDP, PV of debt-to-exports, debt service-to-exports, and debt service-to-revenue (tables contain extensive numeric series and flagged breaches where applicable).
- Figures show drivers of debt dynamics (current account + FDI, nominal interest rate, real GDP growth, price and exchange rate residuals) and realism tools (3-year adjustment in primary balance, public and private investment rates, contribution to real GDP growth).

### Program updates, supplemental information, and performance criteria (Supplement)
- Supplement provides update reflecting revisions to monetary data following an external audit of end-2019 BCRG data and a methodological adjustment to comply with TMU requirements.
- Net impact of adjustments described as marginal and not changing the thrust of the staff appraisal.
- Revisions resulted in updated values for performance criterion on government borrowing from the central bank at end-December 2019 and for NDA and NIR performance criteria for test dates end-December 2019 and end-June 2020.
- Remaining prior action completed: authorities submitted to Parliament a 2021 budget law aligned with program commitments; with this measure, all prior actions for the fifth and sixth reviews have been met.
- Supplement dated December 4, 2020.

### Quantitative performance criteria and indicative targets (Tables 8 and 1)
- Quantitative performance criteria (Billions of Guinean Francs unless otherwise indicated) — sample reported outcomes and statuses:
  - Basic fiscal balance (floor; cumulative change for the year): entries include 548/592/497 (Not Met); 691/829/772 (Not Met); 265/265/429 (Met); 254-296/388 (Met); 622/474/-2,340 (Not Met) across reporting dates.
  - Net domestic assets of the central bank (ceiling; stock): 5,518/5,585/6,539 (Not Met); 5,856/6,064/6,025 (Met); 5,722/5,722/7,238 (Not Met); 5,688/4,863/6,631 (Not Met); 5,579/4,533/9,828 (Not Met).
  - Net government budgetary borrowing from the central bank (ceiling; stock): examples show several "Not Met" and "Met" statuses across reporting dates (table entries: 5,794/5,861/6,148 Not Met; 5,626/5,834/5,753 Met; 5,641/5,641/6,699 Not Met; 5,623/4,798/7,063 Not Met; 5,531/4,485/9,037 Not Met).
  - Net international reserves of the central bank (floor; stock); US$ million: 67/96/72/715 Met; 739/716/875 Met; 795/795/822 Met; 808/898/988 Met; 824/938/924 Not Met (program exchange rates to be used).
- Continuous performance criteria:
  - New non-concessional external debt contracted or guaranteed by central government or central bank (cumulative ceiling) US$ 650 — repeatedly Met (650/650/658).
  - New external arrears of the central government and central bank (ceiling): 0 — Met across reported periods.
- Indicative targets:
  - Tax revenues collected (floor): entries include 12,939/12,939/12,186 (Not Met); 16,960/15,868/15,868 (Met); 4,895/4,895/4,059 (Not Met); 9,889/9,889/8,368 (Not Met); 14,706/14,706/12,412 (Not Met).
  - Domestically financed social safety programs to reduce poverty (cumulative floor): series include 989/827/2 Met; 130/240/371 Met; 787/839 Not Met; 154/154/177 Met; 232/232/398 Met.
  - New domestic arrears accumulated by central government (net) (cumulative): -857/-857/-556 Not Met; -812/-812/-1448 Met; -37/-37/-1132 Met; -49/-49/-2261 Met; -59/-59/-1128 Met.
- Memorandum item: New concessional external debt contracted or guaranteed (cumulative); US$ million: series includes 1052; 1046; 1142; 1621; 1475; 1658; 1613; 1684; 1667; 1667; 1806 (table shows monitoring on signature basis).

### Prior actions, structural benchmarks, and implementation status (Table 11 / Table 2)
- Prior actions met:
  - Submit to Parliament a 2020 Supplementary Budget Law aligned with program commitments — Prior Action Met.
  - Implementation of rules-based FX intervention policy: Prior Action Met (electronic trading platform operational; central bank published instruction).
  - Develop and publish an asset declaration form in line with the decree on the asset declaration regime — Prior Action Met (asset declaration form available at cited URL in source).
  - Submit to Parliament a 2021 Budget Law aligned with program commitments — Prior Action Met.
- Structural benchmarks status:
  - Prepare and adopt a manual for preparation, appraisal and selection of investment projects requiring feasibility studies — End May-2020 — Not met (a draft decree developed with AFW TA).
  - Ministerial order to increase electricity tariffs by 9 percent for households and 10 percent for professionals/industrials in 2020 — June 1, 2020 — Not met (draft decree prepared; signature postponed due to COVID).
  - All new and renewed expiring mining agreements to be in line with tax provisions of mining code; agreements with new infrastructure investments to be submitted to National Assembly with tax expenditure assessment — Continuous — Met (new iron ore agreement ratified July 2020 and submitted with assessment).
  - Develop and publish an asset declaration form (Sixth Review) — End June 2020 — Not met (draft decree on content being finalized with World Bank support).

### Supplementary Letter of Intent and authorities' statement (December 4, 2020)
- Authorities adjusted monetary data following an end-2019 external audit and TMU methodological alignment (reclassified reserve tranche position at IMF from NDA to NFA), resulting in decreased NDA and increased NFA, improving program performance on these performance criteria.
- Authorities submitted the updated table of performance criteria and indicated completion of prior actions with submission of 2021 budget to Parliament.
- Statement by Guinean authorities (December 9, 2020) highlights:
  - Appreciation for IMF support (ECF program, RCF disbursement, CCRT debt service relief, G20 DSSI).
  - COVID-19 situation as of December 04, 2020: confirmed more than 13,000 cases, 76 hospital deaths (mortality rate 0.58%), recovery rate 92.7%.
  - Real GDP growth projected at 5.2 percent in 2020; mining sector expected to expand by 18.4 percent.
  - Fiscal stance in 2020 loosened; basic fiscal balance expected to register a 2.3 percent deficit (from surplus of 0.6 percent of GDP in 2019).

*Sources: Country authorities; and staff estimates and projections (tables and figures as presented in the provided content).*

### 2020. End-of-period y-o-y inflation is expected to rise, mainly due to the disruptions in food

### 1ginea2020005 - 2020. End-of-period y-o-y inflation is expected to rise, mainly due to the disruptions in food

### Key recent macroeconomic developments
- End-of-period y-o-y inflation is expected to rise, mainly due to the disruptions in food supply and transportation but will remain at single-digit levels.
- International reserves stood at 3.8 months of imports.
- The banking system remains stable.
- Credit to the private sector grew by 16.7 percent in average y-o-y at end-September 2020.
- Net commercial bank lending to the government increased by 44.6 percent as result of the increased use of Treasury bills to help finance the COVID-19 response plan.

### Program implementation and performance criteria
- At end-December 2019:
  - Three out of four performance criteria (PCs) were met.
  - The PC on the basic fiscal balance was missed by a very small margin of 0.04 percent of GDP.
  - All three Indicative Targets (ITs) and the two continuous PCs were observed.
- For end-June 2020 program targets:
  - ITs on domestically financed social safety nets programs and domestic arrears were met.
  - Two out of three PCs and the IT on the floor of tax revenues collection fell short of expectations due to the impact of the COVID-19 pandemic and the authorities’ response.
  - Authorities remedied shortfalls by rationalizing non-priority spending and mobilizing additional external resources to finance the deficit.
- Structural benchmarks (SBs) for 2020:
  - Most SBs were missed due to the virus outbreak, but progress is being made.
  - The asset declaration form was published on the website of the audit court in November 2020.
  - Forceful steps are being taken to finalize the Public Investment Management manual during this month of December.
  - The continuous SB on a new agreement for iron ore extraction was implemented and the agreement ratified in July 2020.
  - All four prior actions have been observed.

### Outlook and risks
- Authorities are optimistic: expect a strong recovery in 2021 and sustained high growth in the medium term.
- Growth assumptions rely on:
  - Continued buoyant activity in the mining sector.
  - Pick-up of non-mining activity.
  - Recent investments in mining and energy sectors and large infrastructure projects to enhance competitiveness and boost growth.
  - End of the pandemic and a gradual global recovery.
- Downside risks:
  - Protracted COVID-19 pandemic and its second wave in West Africa.
  - Weak external demand.
- Policy intent: reinforce resilience to shocks, preserve macroeconomic and external stability, and advance bold reforms for higher and more inclusive growth.

### Fiscal policy, targets and reforms
- Draft Budget Law for 2021 envisages a basic fiscal surplus of 0.5 percent of GDP from a deficit of 2.3 of GDP in 2020.
- Medium-term intent: resume fiscal consolidation as COVID-19 emergency subsides and reconstruction needs are addressed.
- Revenue mobilization measures:
  - Rationalization of tax exemptions, including COVID-19 related tax relief.
  - Expansion of the tax base.
  - Enhanced collection of customs and recoverable tax arrears.
- Expenditure stance:
  - Make room for needed social spending.
  - Both domestically and externally financed capital expenditure will increase moderately—albeit below pre-COVID levels—to support the recovery.
- Important fiscal reforms being implemented:
  - Operationalization of the organizational structure at the tax authority – Direction Nationale des Impôts (DNI).
  - Roll out in September 2020 of the E- tax, an online tax declaration and payment system.
  - Forthcoming review of the Tax Code – Code Générale des Impôts (CGI) – with IMF TA support.
  - New model for forecasting mining revenues to be finalized with support of the Fund, other development partners and experts from the extractive sector.
  - Centralization of units’ bank accounts into the Treasury Single Account (TSA).
  - New procurement code, improved public procurement process, and budget execution system.
  - Timely publication of information on public procurement contracts and monthly COVID-19 related expenses, including beneficial ownership information of companies receiving the contracts.
  - Adoption of a manual of procedure for Public Investment Management is underway.

### Mining sector and petroleum pricing
- Authorities concerned about the growing gap between mining output and revenues collected.
- Commitment to effective and adequate implementation of the current Mining Code; code meets best standards but has shortcomings in implementation.
- Authorities committed to implement the automatic petroleum price adjustment mechanism while putting in place mitigating measures to protect the most vulnerable.
- Commitment to proceed with the 2020-2025 multi-year tariff reform to reduce untargeted electricity subsidies.

### Debt sustainability
- Staff assessment: risks of external debt distress remain moderate.
- Authorities’ commitments:
  - Prudent borrowing strategy.
  - Reinforce debt management.
  - Improve public investment management to preserve medium-term debt sustainability.

### Social safety nets
- Creation and activation of Agence Nationale d'Inclusion Economique et Sociale (ANIES) with World Bank support.
- Authorities stepped up domestically-financed social safety nets programs and targeted social spending.
- ANIES will continue to use digital cash and food transfers and count on support from other donors.

### Monetary and exchange rate policies
- Banque Centrale de la République de Guinée (BCRG) actions at onset of pandemic:
  - Provided liquidity support to the banking sector.
  - Implemented an accommodative policy stance and eased reserve requirements and the policy rate.
  - Relaxed some prudential requirements.
- As crisis subsides, authorities will pursue a prudent monetary policy geared towards keeping inflation low.
  - Target the monetary base in line with program objectives.
  - Stand ready to take necessary measures to maintain positive interest rates.
  - Commit to limit monetary financing of the fiscal deficit and have started to reverse advances to the Treasury.
  - Use of Monetary Policy Committee, liquidity instruments and forecasting tools; issuance of monetary regulation instruments – Titres de Régulation Monétaire (TRMs).
- Foreign exchange policy:
  - Continued implementation of the rule-based intervention strategy to contain future interventions, preserve international reserves, support expansion of the interbank market and improve transparency.
  - Efforts to address outstanding recommendations of the 2018 safeguard assessment including revision of the BCRG’s Law.

### Financial sector stability and inclusion
- Post-2019 reforms and planned measures:
  - New chart of accounts and a new risk-based AML/CFT supervision for banks adopted.
  - Implementation by end 2021 of most provisions under Basel II & III to improve BCRG’s regulatory framework.
  - Adoption of International Financial Reporting Standards (IFRS) and establishment of a bank resolution framework planned with IMF and partners.
  - Finalization of the legal framework of the deposit guarantee system.
  - Operationalization of emergency liquidity assistance and banking resolution frameworks.
  - Development of a national strategy for inclusive finance to broaden and deepen financial inclusion and support the private sector.

### Business climate, governance and AML/CFT
- Institutional and governance measures:
  - Asset declaration form completed and made public on the Audit Court’s website, in line with decree adopted in March 2020.
  - Resources to be allocated in the 2021 budget law for proper monitoring of execution.
  - Revisions of legislation on criminalization of acts of corruption in line with UNCAC underway, albeit delayed due to the pandemic.
- AML/CFT:
  - New AML/CFT law drafted in April 2020; review of its consistency with national legislation being finalized with IMF TA support.

### Conclusion and requests
- Authorities remain committed to prudent policies and reforms to strengthen macroeconomic stability and achieve a robust and sustained economic recovery.
- Considering progress under the ECF-supported program, authorities request Executive Directors’ support for:
  - Completion of the 5th and 6th (final) reviews under the ECF arrangement.
  - Approval of request for waivers of nonobservance of performance criteria.

*Source: 1ginea2020005 - 2020. End-of-period y-o-y inflation is expected to rise, mainly due to the disruptions in food supply and transportation.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1ginea2020005.pdf_