## 1ginea2021001

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---

### COVID-19 health shock, response, and socioeconomic impacts
- Health developments and response:
  - Second wave of COVID-19 infections towards the end of Q1 2021; measures reinstated and infections improved.
  - New Ebola outbreak announced mid-February 2021; localized and under control.
  - Vaccination campaigns started for both COVID-19 and Ebola.
  - COVID-19 case statistics (as of May 10, 2021): Total cases: 21990; Total deaths: 151; Active cases: 1520.
- COVID-19 Response Plan execution (billions GNF, end-2020):
  - Initial Estimated Cost: Total 2,460; Execution: Total 2,203; Execution rate (percent): Total 90.
  - I. Health: 1,267 (Initial); 1,361 (Execution); 107 (Execution rate).
    - o/w tax measures (Health): 225 (Initial); 200 (Execution); 89 (Execution rate).
  - II. Social Inclusion: 888 (Initial); 383 (Execution); 43 (Execution rate).
  - III. Private Sector: 305 (Initial); 458 (Execution); 150 (Execution rate).
    - o/w tax measures (Private Sector): 128 (Initial); 229 (Execution); 179 (Execution rate).
- Socioeconomic impacts:
  - Poverty likely increased by 4 percentage points due to COVID-19.
  - More than a third of survey respondents reported experiencing hunger; nearly 20 percent indicated difficulty in accessing health care.
  - Female-headed households stopped working at higher rates due to work closures and illness.
  - More than half of respondents received government assistance during the pandemic.

### Recent macroeconomic developments and key indicators
- Growth and sectoral composition:
  - Real GDP growth: 2020: 7.1 percent (driven by mining); Non-mining economy growth 2020: 1.3 percent.
  - Domestic artisanal gold production increased by an estimated 120 percent; authorities reported a five-fold spike in artisanal gold exports in 2020.
- Inflation and prices:
  - Headline inflation (average, y-o-y): end-2020: 10.6 percent; April 2021: 12.4 percent.
  - Food prices rose 16 percent y-o-y in April 2021.
  - Transport prices had increased by more than 25 percent y-o-y in April 2020.
- Monetary and banking:
  - Base money growth: 19.2 percent y-o-y in 2020; peaked at 38.5 percent y-o-y in September 2020.
  - Gross stock of outstanding advances to government: 1.8 percent of GDP (of which 1.2 percent were accumulated in 2020).
  - Credit growth: 25 percent y-o-y at end-2020; Private sector credit growth: 8 percent y-o-y at end-2020.
  - Banks remain profitable; suspension of NPL classification may mask deterioration.
  - All banks compliant with minimum capital adequacy; two small banks did not respect net equity capital requirement (one has since raised capital; the other is under transfer of ownership).

### Fiscal outcomes, COVID-19 fiscal response, and financing
- 2020 fiscal and COVID measures:
  - 2020 fiscal deficit: 2.9 percent of GDP.
  - Implementation cost of the COVID-19 response: about 1.5 percent of GDP.
  - Revenues underperformed projections by 0.9 percent of GDP.
  - Grants were 1 percent of GDP lower than projected due to disbursement delays.
  - Authorities canceled planned-but-unexecuted expenditures at end-2020 totaling about 2½ percent of GDP.
  - Wages were 0.4 percent of GDP higher than projected.
- Financing and arrears:
  - Authorities mobilized about 2.9 percent of GDP in external financing (excluding Souapiti loan disbursement).
  - External financing included 1 percent of GDP from the IMF’s RCF.
  - Mobilized financing and DSSI/CCRT grants provided space for a large arrears repayment of 1.7 percent of GDP.
  - Net borrowing from the central bank increased by 0.9 percent of GDP to pre-finance the COVID-19 response.
- Fiscal table (Health and Other Covid-19 Expenditures, USD million and % of GDP):
  - Covid vaccination: 79.5 USD million / 0.48% of GDP.
  - Preparatory phase: 2.7 USD million / 0.02% of GDP.
  - Logistics: 24.9 USD million / 0.15% of GDP.
  - Operational costs: 52.0 USD million / 0.31% of GDP.
  - Covid cash transfers: 22.2 USD million / 0.13% of GDP.
  - Support to private sector: 9.7 USD million / 0.06% of GDP.
  - Ebola response: 28.4 USD million / 0.17% of GDP.
  - Total: 139.8 USD million / 0.85% of GDP.

### External sector, exchange rate, and reserves
- External balances and trade:
  - Current account deficit: 13.7 percent of GDP in 2020.
  - Exports boomed on soaring bauxite and artisanal gold production.
  - Service imports spiked due to digitalization (launch of 4G) and shipping disruptions; freight costs rose sharply.
- Exchange rate and reserves:
  - Real effective exchange rate appreciation trend slowed; GNF fluctuated more widely against the USD since November 2020 rules-based FX intervention policy.
  - BCRG gross sales on the FX market moderated.
  - BCRG accumulated reserves: US $1,355m at end-2020 (2.2 months of prospective imports); staff recommends gradual accumulation to at least 3 months of reserve coverage.
  - Reserves expected to reach 3.0 months of prospective imports in 2026.

### Outlook and risk assessment
- Growth projections:
  - 2021 growth projected at 5.2 percent; medium-term growth projected to remain above 5 percent as new mining investments materialize (notably Simandou).
  - Non-mining sector expected to recover gradually, reaching pre-pandemic levels in 2022.
- Inflation and external outlook:
  - Inflation expected to remain above BCRG single digit target throughout 2021; return to single digits thereafter.
  - Current account deficit expected to shrink in 2021 but remain elevated; financed by strong FDI.
- Risks (tilted to the downside):
  - Most immediate risk: intensification of the COVID-19 pandemic.
  - Commodity price shocks are significant given mining concentration.
  - Combination of COVID-19 intensification and commodity shocks could detract over 4 points from GDP growth (Annex V).
  - Other external risks: reduced donor financing availability, increased geopolitical tensions, climate change vulnerability.
- Upside risks:
  - Faster-than-expected mining production or sustained elevated artisanal gold production.
  - Faster implementation of planned investment (Simandou) would significantly boost growth.

### Fiscal policy recommendations and authorities’ stance
- Short-run staff advice:
  - Contain the pandemic, implement the COVID-19 vaccine plan (target: cover 20 percent of the population), support vulnerable households and the private sector to minimize scarring.
  - Estimated additional costs of COVID-19 and Ebola vaccination and containment: about 0.6 percent of GDP to expenditures.
  - Stronger coordination between health and economic teams; better data sharing for planning and budgeting vaccination.
  - Scale up COVID-19 response cash transfers expected to cover 120,000 households; ANIES extending digital cash transfers to 20,000 households; WFP food procurement for 15,120 households.
  - Prepare gradual repayment plan for postponed utility bills rather than lump-sum demands.
  - Prioritize operationalization of SME loan Guarantee Fund; finalize statutes, select Director General, obtain BCRG license with World Bank support.
- Medium-term staff advice:
  - Foster diversification and inclusive sustainable growth by: (i) scaling up public investment; (ii) addressing poor human capital; (iii) strengthening governance; (iv) improving business climate and financial sector.
  - Create fiscal space through domestic resource mobilization, especially in the mining sector, and greater spending efficiency; mobilize grants and concessional financing to preserve debt sustainability.
  - Monetary policy: focus on single digit inflation and exchange rate flexibility to build reserves and mitigate shocks.
  - Treasury to repay about 60 percent of outstanding advances accumulated in 2020 (0.7 percent of GDP) to support BCRG price stability and independence; staff recommends at least 0.7 percent of GDP in 2021 repayment.

### Revenue mobilization and mining sector reforms
- Tax potential and reforms:
  - Tax potential estimated average around 18 percent of GDP in 2000-2019 with a gap of 7.3 percent of GDP.
  - Recommended reforms: digitalize tax management; match tax and customs databases; fully operationalize DNI structure; adopt revised General Tax Code per IMF TA.
- Mining revenue:
  - Divergence between production and revenue significantly above peers.
  - Simulation of modest mining reforms: additional potential revenue gains of 0.8 percent of GDP from a package (removal of one mining producer’s corporate tax exemptions for one year; increasing bauxite prices of two companies to average levels; reducing unit costs of one company via interest deductibility treatment).
  - At 0.8 percent of GDP this equals nearly 4 times the agriculture budget and more than half the health or education budgets.
  - Recommendations: ensure new contracts governed by the Mining Code; limit tax exemptions to those under the Code; consider mechanism to regulate bauxite transfer prices; strengthen audits for low-price bauxite sales; consider reinstituting a small tax on artisanal gold and survey artisanal gold producers/intermediaries.
- Authorities’ commitments:
  - Aim to double domestic revenues by 2023 with performance contracts.
  - Conduct tax audits of mining, telecom, and banking sectors with AfDB support; build capacity on transfer pricing.
  - Authorities agreed to conduct a study on artisanal gold (abolition of artisanal gold tax in 2017 had led to some formalization and reserve inflow).

### Monetary policy, central bank operations, and recommendations
- Monetary context and operations:
  - BCRG MPC maintained a modestly accommodative stance in March 2021.
  - Unremunerated reserve requirement: 16 percent.
  - MPR floor: 11.5 percent; collateralized intraday refinancing facility rate: 16.5 percent.
  - Sterilization and liquidity operations: recommend more frequent open market operations at fixed rate (policy rate) with full allotment.
- Advances and inflation link:
  - Outstanding advances peaked at GNF 5,306 billion (3.6 percent of GDP) at end-August 2020; declined to GNF 3,180 billion at end-2020.
  - Repayment of advances should reduce the monetary base and alleviate inflationary pressures; staff welcomes corrective measures taken end-2020 and recommends continuation of repayment with at least 0.7 percent of GDP in 2021.
- Policy framework modernization:
  - Transition toward interest-rate operational framework in medium term.
  - Reduce reserve requirement from 16 to internationally comparable levels (staff suggests reduction to 10 percent) to free up resources and improve transmission.
  - Ensure Treasury pays interest on recapitalization and remunerates outstanding advances.

### Financial sector stability, inclusion, and AML/CFT
- Banking sector recommendations:
  - Remove extraordinary support measures as pandemic subsides.
  - Restore prudential framework: reclassify NPLs and provision to reflect true asset quality; BCRG to intensify supervisory monitoring and take action where required.
  - Phase-in arrangements to avoid sudden NPL spikes; increase resources for supervision.
  - BCRG advised to divest its stake in the development bank to limit financial and reputational risks.
- Financial inclusion and consumer protection:
  - Adoption of 2020-23 National Strategy for Financial Inclusion (NSFI) forthcoming with World Bank support; objectives include SME, youth, women access and mobile money services.
  - Mobile money expansion: adults with a mobile money account rose from 1.5 percent in 2014 to 13.8 percent in 2017; subscribers increased 50 percent in first nine months of 2020 to 6 at end-September 2020 (source: BCRG (2020)).
- AML/CFT:
  - Promulgation of AML/CFT law is positive; next steps: develop implementing regulations, strengthen financial intelligence unit independence, complete an AML/CFT strategy, transition to risk-based supervision.

### Diversification, private sector, and investment priorities
- Structural challenge and objectives:
  - Mining sector has driven growth but accounts for just 6 percent of total employment; agriculture employs more than half of the population.
  - Strategic objective: energize the non-mining sector to create jobs, reduce poverty, and reduce vulnerability.
- Policy channels to foster diversification:
  - Increase returns to private non-mining investment via enhanced public investment in infrastructure and human capital.
  - Strengthen business climate and governance; operationalize land registry and foreign trade portal; digitalization reforms.
  - Targeted agricultural interventions: access to high-yield inputs, value chain integration, extension services.
- DIGNAR-19 model findings:
  - Downside scenario (2021 shocks: 24 percent decline in mining prices; 10 percent decline in mining exports; 2 percent decline in labor supply) reduces GDP growth by 4.6 percentage points relative to baseline in 2021 and raises public debt near 50 percent of GDP by 2022 absent consolidation.
  - Upside scenario (public investment efficiency gains, 1.7 percent increase in private investment, revenue increases reaching 3.5 percent of GDP by 2022 relative to baseline) increases non-mining and total growth by 2.6 percentage points by 2026 and improves debt sustainability below pre-pandemic levels by 2024.

### Public investment management, PFM, and human capital priorities
- PIM/PFM status and recommendations:
  - PIM and PFM improved but critical shortcomings remain; finalize and adopt PIM Manual and a decree clarifying roles across planning, allocation, and execution phases.
  - Expand Treasury Single Account coverage (currently 60 percent of autonomous public entities).
  - Improve data sharing and reconciliation between Treasury, Budget, Debt departments and BCRG; strengthen cash management to prevent arrears.
- Human capital:
  - Life expectancy: 60.7 years.
  - Adult literacy low with large gender gap; 16 percent of adults completed secondary education.
  - Total education expenditure about 3 percent of GDP; roughly 1/3 of education budget goes to tertiary education serving 8 percent of students.
  - Recommendations: boost and reorient education spending to primary, secondary, and vocational subsectors; expand classroom access; match curricula with labor market needs; targeted support for poor and rural households.
- Social protection:
  - Recent increase in social protection spending should be permanent to build resilience.
  - Use savings from energy reform to strengthen social protection; ANIES capacity building with World Bank collaboration.

### Debt sustainability, risks, and public debt profile
- Public debt dynamics and assessment:
  - Gross public debt: 2018: 38.6; 2019: 38.0; 2020: 43.4; projected 2021: 43.3; 2026: 41.9.
  - Total public debt rose to US$6.4 billion (43.4 percent of GDP) at end-2020 from US$5.0 billion (38.0 percent) at end-2019.
  - External public debt: US$3.8 billion (25.8 percent of GDP) at end-2020.
  - DSA assesses Guinea at moderate risk of overall and external debt distress; limited space to absorb shocks.
- Debt composition highlights (end-2020, US$ millions and percent of GDP):
  - Total PPG Debt: 6,394 (43.4 percent of GDP).
  - Domestic Debt: 2,593 (17.6 percent of GDP).
    - Treasury bills (<12 months): 726 (4.9 percent of GDP).
    - BCRG (long-term obligations): 1,028 (7.0 percent of GDP).
  - External Debt: 3,800 (25.8 percent of GDP).
    - Multilateral creditors: 1,737 (11.8 percent of GDP).
      - IMF: 208 (3.5 percent of GDP).
      - World Bank: 575 (3.9 percent of GDP).
    - Official Bilateral Creditors: 1,800 (12.2 percent of GDP); China: 1,277 (8.7 percent of GDP); Loan for Souapiti dam: 575 (3.9 percent of GDP).
  - Memo: External Arrears: 164 (1.1 percent of GDP); Official GNF per USD (EOP): 9,990 at end-2020.
- Policy guidance:
  - Maintain prudent external borrowing, maximize concessional financing, improve debt management and broaden public debt reporting (with World Bank support) to include SOEs.
  - Keep realistic envelope for externally-financed public investment to maintain moderate risk of debt distress.
  - Monitor contingent liabilities and undertake stress tests (commodity price, contingent liabilities, weak policy, higher non-concessional borrowing).

### Petroleum pricing and automatic adjustment mechanism
- Background and fiscal impact:
  - 2018 oil import surge led to significant subsidies when TSPP set at zero; fiscal losses 0.6 percent of GDP.
  - Retail price changes: official price increase by 25 percent in 2018; retail price reductions of 5 percent in April 2020 and 5 percent in June 2020.
  - TSPP revenues in 2020: 1,633 billion GNF (83 percent increase from previous year; 1.3 in percent of GDP).
  - Retail pump price as of June 2020 and May 2021: 9,000 GNF per liter.
- Recommendations:
  - Implement an automatic petroleum pricing mechanism with smoothing and phased communication.
  - Orient efficiency gains towards income-supporting measures (cash transfers) to protect the vulnerable.
  - Prioritize mechanism once COVID-19 abates; original planned timeline was by June 2020 (delayed).

### Data, statistics, and IMF technical assistance
- Data and statistics:
  - Data provision broadly adequate but gaps in national accounts and fiscal statistics; national accounts rebased to 2018 base year.
  - CPI covers only Conakry with weights reference period 2002; update ongoing.
  - Balance of Payments: BPM6 compilation; need improved imports, financial account, and artisanal gold sector data.
  - TOFE modernization required to align with GFSM 2014; general accounting system lacks comprehensiveness and timeliness.
- IMF TA and capacity building:
  - Guinea intensive TA recipient under Capacity Building Framework for fragile countries; 76 missions Jan 2018–Dec 2020.
  - TA priorities: tax policy/administration; PFM/PIM; debt management; monetary and FX operations; statistics.
  - Selected recent TA: SRFs compiled and to be disseminated in IFS (May 2021); GFSM 2014 and national accounts TA in 2020.
- Safeguards and BCRG:
  - Safeguards assessment (April 2021) found steps taken but remaining weaknesses (monetary financing limits, timeliness of IFRS, dormant accounts).
  - BCRG preparing IFRS financial statements for 2020; establishing ad hoc committee to close dormant accounts.

### Institutional strengthening, governance, and anti-corruption
- Governance and procurement:
  - RCF governance commitments broadly implemented; COVID-19 procurement contracts published; ex-post audit underway.
  - Staff encourages publication and searchable disclosure of beneficial ownership for awarded contracts.
- Anti-corruption:
  - National strategy identifies corruption risks; recommendations include whistleblower protections; bolster National Anti-Corruption Agency (ANLC) independence and capacity; criminalize all corruption offenses.
  - Asset declaration regime prepared but implementation delayed by Constitutional Court action; operationalization recommended urgently.
- Digitalization:
  - Digitalization priorities: e-tax, online business registration, foreign trade portal, RTGS, digital payments, credit bureau migration.
  - Fixed broadband household penetration at end-2018: 0.01 percent; digitalization seen as key to productivity and private sector growth.

### Staff appraisal — priorities and next steps
- Immediate priorities:
  - Continue vaccine rollout and contain pandemic and Ebola; support vulnerable households and targeted private sector support; mobilize grants and concessional borrowing where possible.
  - Continue repayment of central bank advances to curb inflationary pressures.
- Medium-term reforms:
  - Modernize monetary framework, strengthen liquidity management, and maintain rules-based FX intervention policy.
  - Transform mining wealth into revenue: address transfer mispricing, apply Mining Code to new contracts, limit tax exemptions, adopt General Tax Code.
  - Strengthen PIM/PFM, finalize PIM Manual and complementary decree, expand TSA coverage, and improve budget reporting and cash management.
  - Invest in human capital (shift education spending to primary/secondary/vocational) and strengthen social safety nets as permanent policy.
- Institutional and TA support:
  - Continue IMF TA focus on domestic revenue mobilization, PFM/PIM, debt management, central bank operations, governance, and macro statistics.
  - Staff recommends next Article IV consultation be on the standard 12-month cycle.

*Source: IMF staff report excerpt from "1. COVID-19 in Guinea" and related chapters (content provided).*

### 1. COVID-19 in Guinea _____________________________________________________________________________6

### 1. COVID-19 in Guinea

### Context and recent political developments
- Macro stability maintained over the last decade despite commodity swings, civil unrest, and the COVID-19 pandemic; Guinea completed ECF-supported programs in 2016 and December 2020.
- Institutional fragility and weak social indicators persist: nearly 45 percent of the population live below the poverty line.
- President Condé won a third term in October 2020 and prioritized: the fight against corruption, support for the most vulnerable, diversification, domestic resource mobilization, and job creation.
- Social discontent among the opposition remains high.

### COVID-19 health shocks and response
- The COVID-19 pandemic followed the 2014–15 Ebola crisis; a second wave of COVID-19 infections occurred towards the end of Q1 2021 but improved with reinstated health directives and gathering restrictions.
- A new Ebola outbreak was announced in mid-February 2021; it was localized and remains under control. Vaccination campaigns started for both COVID-19 and Ebola.
- COVID-19 case statistics (as of May 10, 2021):
  - Total cases: 21990
  - Total deaths: 151
  - Active cases: 1520
- COVID-19 Response Plan execution (billions GNF):
  - Initial Estimated Cost (end-2020): Total 2,460
  - Execution (end-2020): Total 2,203
  - Execution rate (percent): Total 90
  - By category:
    - I. Health: 1,267 (Initial); 1,361 (Execution); 107 (Execution rate)
    - o/w tax measures (Health): 225 (Initial); 200 (Execution); 89 (Execution rate)
    - II. Social Inclusion: 888 (Initial); 383 (Execution); 43 (Execution rate)
    - III. Private Sector: 305 (Initial); 458 (Execution); 150 (Execution rate)
    - o/w tax measures (Private Sector): 128 (Initial); 229 (Execution); 179 (Execution rate)

### COVID-19 socioeconomic impacts
- The crisis could reverse gains in poverty reduction; poverty has likely increased by 4 percentage points as a result of COVID-19.
- More than a third of survey respondents reported experiencing hunger; nearly 20 percent indicated difficulty in accessing health care.
- Female-headed households stopped working at higher rates due to work closures and illness.
- More than half of respondents received government assistance during the pandemic.

### Recent developments summary
- Growth in 2020 reached 7.1 percent, driven by a booming mining sector.
- Non-mining economy grew by 1.3 percent in 2020 (about one fourth of the 2019 growth rate).
- Domestic artisanal gold production increased by an estimated 120 percent; authorities reported a five-fold spike in artisanal gold exports in 2020 (see footnote discussion in source).

---

### Real and monetary sector
- Headline inflation and drivers:
  - Headline inflation reached 10.6 percent at end-2020 (average, y-o-y).
  - Inflation was 12.4 percent in April 2021 (y-o-y).
  - Food prices rose 16 percent y-o-y in April 2021.
  - Transport prices had increased by more than 25 percent y-o-y in April 2020.
- Monetary aggregates and central bank operations:
  - Base money grew by 19.2 percent y-o-y in 2020 (higher than the 11 percent average for the three pre-pandemic years).
  - Base money growth peaked at 38.5 percent y-o-y in September 2020, then moderated by end-2020 as the government began repaying central bank advances and the BCRG engaged in sterilization operations.
  - Gross stock of outstanding advances to government: 1.8 percent of GDP (of which 1.2 percent were accumulated in 2020).
- Credit and banking sector:
  - Credit growth increased by 25 percent (y-o-y) at end-2020.
  - Private sector credit growth was 8 percent (y-o-y) at end-2020, reflecting crowding-out by government borrowing.
  - Banks remain profitable and return on equity continued its positive trend; suspension of NPL loan classification may mask deterioration of bank portfolios.
  - All banks were compliant with the share minimum capital adequacy requirement; two small banks did not respect the net equity capital requirement (one has since raised capital; the other is under transfer of ownership).

---

### Fiscal and debt indicators
- Fiscal outcomes and COVID-19 response:
  - 2020 fiscal deficit: 2.9 percent of GDP, reflecting the COVID-19 Response Plan and expenditure suppression to accommodate a large arrears repayment.
  - Implementation cost of the COVID-19 response: about 1.5 percent of GDP.
  - Revenues underperformed projections by 0.9 percent of GDP.
  - Grants were 1 percent of GDP lower than projected due to disbursement delays.
  - Authorities canceled planned-but-unexecuted expenditures at end-2020 totaling about 2½ percent of GDP (mostly subsidies and capital expenditure).
  - Wages were 0.4 percent of GDP higher than projected.
- Financing and arrears:
  - Authorities mobilized about 2.9 percent of GDP in external financing (excluding Souapiti loan disbursement).
  - External financing included 1 percent of GDP from the IMF’s RCF.
  - The mobilized financing and DSSI/CCRT grants provided space for a large arrears repayment of 1.7 percent of GDP.
  - Net borrowing from the central bank increased by 0.9 percent of GDP to pre-finance the COVID-19 response while donor support was mobilized.
  - Two expected loans from AfDB and the Islamic Development Bank did not come through; the World Bank’s Regional Energy DPO and Social Cash transfers’ grant were delayed to 2021.
- Debt trajectory:
  - The debt/GDP ratio increased due to an ambitious public investment agenda and the COVID-19 response but is expected to decline steadily after 2021.

---

### External sector indicators
- Current account and reserves:
  - Current account deficit increased to 13.7 percent of GDP in 2020.
  - Exports boomed on soaring bauxite and artisanal gold production, supported by favorable world commodity prices.
  - Service imports spiked due to digitalization (launch of a 4G wireless network) and shipping disruptions; freight costs rose sharply, with shipping container rates contributing to service import increases.
- Exchange rate and FX market activity:
  - The real effective exchange rate’s appreciation trend slowed.
  - The GNF fluctuated more widely against the USD since implementation of the rules-based FX intervention policy in November 2020.
  - BCRG gross sales on the FX market moderated; aggregated monthly sales/purchases and net sales activity are shown in source figures.

---

### Outlook and risks
- Growth projections:
  - 2021 growth projected at 5.2 percent, driven by continued mining expansion (several new bauxite mines expected to come online).
  - Medium-term growth projected to remain above 5 percent as new mining investments materialize (in particular the Simandou iron ore project).
  - Non-mining sector expected to recover gradually, reaching pre-pandemic levels only in 2022.
- Inflation outlook:
  - Inflation expected to remain above the BCRG's single digit target throughout 2021 as supply disruptions and accommodative policies continue; expected to return to single digits thereafter as factors unwind.
- Current account and financing:
  - Current account deficit expected to shrink in 2021 but remain elevated in the medium-term, financed by strong FDI.
- Risk assessment (tilted to the downside; Annex IV):
  - Most immediate risk: intensification of the COVID-19 pandemic.
  - Commodity price shocks are significant given rising concentration in mining sector growth.
  - A combination of COVID-19 intensification and commodity shocks could detract over 4 points from GDP growth (Annex V).
  - Other external risks: reduced donor financing availability and increased geopolitical tensions.
  - Climate change vulnerability is increasing.
- Upside risks:
  - Mining production could increase faster than expected; artisanal gold production could remain elevated.
  - Faster implementation of planned investment, particularly the Simandou project, would significantly boost growth.

---

### COVID-19 impact on households and businesses (survey findings)
- Poverty impact:
  - Poverty likely increased by 4 percentage points due to COVID-19.
- Informal business income reductions (percent of respondents by reduction band and area shown in source figures).
- Reasons for stopping work (percent of respondents):
  - Work closures, sickness, personnel reduction, other — with differences by gender (men/women) shown in source figures.
- Health and social impacts (percent of respondents reporting):
  - Eaten less, cannot access healthcare for children, less access to drinking water, increase in domestic violence — with urban/rural breakdowns shown in source figures.

*Source: IMF staff compilation from "1. COVID-19 in Guinea" (source PDF content provided).*

### 12.      The authorities broadly concur with staff’s outlook and risks. They noted the subdued

### 12.      The authorities broadly concur with staff’s outlook and risks.

### Summary of outlook and risks
- Authorities concurred with staff on: the subdued outlook for the non-mining sector in 2021, the increasing need to rein in inflation, the importance of mitigating a new COVID-19 wave, and the need to spur greater levels of diversification.  
- Authorities emphasized the importance of the mining sector as a key source of growth, income, and public revenues.

### Policy recommendations (staff)
- Short run: deal with the pandemic while supporting the recovery and minimizing scarring.  
- Medium term: foster diversification and inclusive and sustainable growth through:  
  - (i) scaling up public investment;  
  - (ii) addressing poor human capital;  
  - (iii) strengthening governance; and  
  - (iv) improving the business climate and the financial sector.  
- Create fiscal space through domestic resource mobilization, especially in the mining sector, and greater spending efficiency; mobilize grants and concessional financing to preserve debt sustainability.  
- Monetary policy: focus on single digit inflation and exchange rate flexibility to build reserves and mitigate shocks.

### Fiscal policy — Responding to the pandemic
- Key 2021 priority: contain the pandemic by implementing the COVID-19 vaccine plan, while supporting vulnerable households and the private sector to minimize scarring.  
- Vaccination rollout: target of covering 20 percent of the population; vaccines procured through the COVAX initiative and other suppliers; plan to expand coverage in subsequent years.  
- Ebola response: additional vaccination and containment for affected areas.  
- Estimated additional costs of COVID-19 and Ebola vaccination and containment: about 0.6 percent of GDP to expenditures.  
- Recommendation: stronger coordination between health and economic teams, including better sharing of data, to enhance planning and budgeting for vaccination.  
- Social assistance and transfers: scale up COVID-19 response cash transfers expected to cover 120,000 households; ANIES collaborating with fintech to extend digital cash transfers to 20,000 households; procurement of food for WFP distribution to 15,120 households.  
- Private sector support measures ended in 2020 (except financial sector measures); firms asked to repay postponed utility bills as a lump sum — staff recommended preparing a gradual repayment plan.  
- SME loan Guarantee Fund: operationalization prioritized; work ongoing to finalize statutes, select Director General, and obtain BCRG license with World Bank support.  
- Basic balance in 2021 expected to deteriorate by about ½ percent compared to previous projections to reflect vaccination and support costs, to -0.1 percent of GDP.  
- Compared to 2020, projected basic balance and overall balance (-2.3 percent of GDP) represent consolidations worth 1.2 and 0.7 percent of GDP, respectively, partly driven by expected increase in grants.  
- Text Table 2: Health and Other Covid-19 Expenditures (USD million and % of GDP):  
  - Covid vaccination: 79.5 USD million / 0.48% of GDP  
  - Preparatory phase: 2.7 USD million / 0.02% of GDP  
  - Logistics: 24.9 USD million / 0.15% of GDP  
  - Operational costs: 52.0 USD million / 0.31% of GDP  
  - Covid cash transfers: 22.2 USD million / 0.13% of GDP  
  - Support to private sector: 9.7 USD million / 0.06% of GDP  
  - Ebola response: 28.4 USD million / 0.17% of GDP  
  - Total: 139.8 USD million / 0.85% of GDP  
- Financing 2021 needs: higher-than-expected grants, debt service relief, and concessional borrowing expected to contribute and to partially repay outstanding advances to BCRG. Staff recommended mobilizing grants and concessional financing; if external support not forthcoming, rationalize non-priority expenditure.  
- Recommendation: Treasury repay about 60 percent of outstanding advances accumulated in 2020 (0.7 percent of GDP) to support the central bank’s price stability objective and strengthen independence.

### Authorities’ views on pandemic and fiscal measures
- Authorities acknowledge need to speed up vaccination and continue supporting vulnerable households; monitoring infections before deciding new private sector support.  
- Authorities considered repayment of advances could be less ambitious in a pandemic year.

### Revenue mobilization
- Tax potential: estimated average of around 18 percent of GDP in 2000-2019, with a large gap at 7.3 percent of GDP.  
- Recommended intensification of reforms: (i) digitalizing tax management; (ii) matching tax and customs databases; (iii) fully operationalizing the new Direction Nationale des Impôts (DNI) organizational structure; and (iv) adopting the revised General Tax Code in line with IMF TA.  
- Recent measures: new DNI structure implemented; work to eliminate tax exemptions not approved by the National Assembly (excluding mining exemptions endorsed by the National Assembly).  
- Mining sector: divergence between production and revenue significantly above peers; complement tax reforms with mining sector revenue reform.  
- Simulation of modest mining reforms: additional potential revenue gains of 0.8 percent of GDP from a package including removal of one mining producer’s corporate tax exemptions for one year, increasing bauxite prices of two companies to average levels, and reducing unit costs of one company via interest deductibility treatment — at 0.8 percent of GDP this represents nearly 4 times the country’s agriculture budget and more than half the health or education budgets.  
- Recommendations: ensure new contracts governed by the Mining Code; limit tax exemptions to those under the Code; consider mechanism to regulate bauxite transfer prices; strengthen audits for companies selling bauxite at low prices; consider reinstituting a small tax on artisanal gold and undertake a survey of artisanal gold producers and intermediaries.  
- Authorities’ targets and actions: aim to double domestic revenues by 2023 with performance contracts; will conduct tax audits of mining, telecom, and banking sectors with AfDB support; building capacity on transfer pricing issues; some Ministers favor more attractive fiscal environment than Mining Code to attract investment; authorities agreed to conduct a study on artisanal gold (abolition of artisanal gold tax in 2017 had led to some formalization and reserve inflow).

### Energy sector and fuel pricing
- Multi-year electricity sector reform to gradually bring tariffs to cost-recovery should resume after pandemic abates. Progress on eliminating regressive and inefficient electricity subsidies was halted in 2020. World Bank support ongoing; timing unclear. Staff recommended resuming reform as soon as feasible, accompanied by increased social protection and communications.  
- Fuel subsidies: fuel prices reduced in June 2020; subsequent recovery in global oil prices and USD appreciation not passed through, leading to subsidy introduction since March; authorities plan to increase prices to eliminate the subsidy soon. Staff recommends implementing an automatic fuel price adjustment mechanism in the medium term.

### Strengthening social protection
- Recent increase in social protection spending should be permanent to build resilience and reduce poverty.  
- Social safety nets can incentivize school attendance (e.g., school meals), strengthen human capital, and stimulate local economies.  
- ANIES building capacity with World Bank collaboration; staff recommended using savings from energy reform to strengthen social protection.

### Human capital and education/health investment
- Human capital indicators and needs: life expectancy 60.7 years; one of the lowest adult literacy rates globally with a large gender gap; 16 percent of adults have completed secondary education; roughly half of rural children age 6-14 are reportedly employed.  
- Lack of financial means prevents school attendance; weak health and educational outcomes hinder poverty reduction and leave labor force lacking required technical competencies. Pandemic likely to derail advances in education and health.  
- Spending and efficiency: total education expenditure about 3 percent of GDP (below peers); spending weakened by inefficiencies and poor targeting; roughly 1/3 of the education budget is spent on tertiary education which serves just 8 percent of the student body.  
- Recommendation: boost and reorient education spending to primary, secondary, and vocational subsectors; additional expenditure needed to expand classroom access, match curricula with labor market needs, and introduce targeted support for poor and rural households.

### Public investment management (PIM) and public financial management (PFM)
- PIM and PFM have improved but critical shortcomings remain; Guinea lags other LIDCs in PIM effectiveness. Budget execution on infrastructure was systematically under-executed during the ECF-supported program.  
- Recommendation: finalize and promptly adopt the PIM Manual (prepared with IMF TA since 2018); adopt a decree clarifying roles and responsibilities across planning, allocation, and execution phases of PIM.  
- PFM progress: implementing PREFIP 2019-2022; introduced a Treasury Single Account (TSA) with coverage currently at 60 percent of autonomous public entities — coverage needs expansion.  
- Further needs: improve data sharing and reconciliation between the Treasury, the Budget, the Debt departments and the BCRG (e.g., timely reconciliation of 2020 budget execution); strengthen cash management to prevent and deal with arrears; improve budget preparation and execution. Forthcoming IMF TA in these areas is critical for transparency and reporting timeliness.

### Medium-term outlook and debt sustainability
- Infrastructure investment scale-up to continue in the medium term, financed largely by improved domestic revenue mobilization.  
- Projection: primary and overall deficit are projected to improve by 0.1 percent of GDP from 2022 to 2026.  
- Revenues projected to provide additional resources growing by 1.5 percent of GDP from 2022 to 2026 that support expenditure expansion by 0.9 percent of GDP (most of which is public investment benefiting from planned PIM improvements).  
- Projected deterioration of grants by 0.5 percent of GDP in the medium-term based on conservative assumption to include only firmly committed grants.

### Selected economic indicators (from Text Table 1, percent of GDP unless otherwise indicated; annual real GDP growth and inflation are shown as reported)
- Real GDP growth: 2018: 6.4; 2019: 5.6; 2020: 7.1; 2021: 5.2; 2022: 6.1; 2023: 5.9; 2024: 5.5; 2025: 5.3; 2026: 5.3  
- Mining growth: 2018: 14.0; 2019: 9.4; 2020: 34.6; 2021: 7.7; 2022: 7.1; 2023: 6.3; 2024: 6.3; 2025: 6.2; 2026: 6.3  
- Non-mining growth: 2018: 4.9; 2019: 4.9; 2020: 1.3; 2021: 4.5; 2022: 5.8; 2023: 5.7; 2024: 5.3; 2025: 5.0; 2026: 5.0  
- Inflation (average): 2018: 9.8; 2019: 9.5; 2020: 10.6; 2021: 11.6; 2022: 9.9; 2023: 8.0; 2024: 7.8; 2025: 7.8; 2026: 7.8  
- Central government overall balance, incl. grants: 2018: -1.1; 2019: -0.5; 2020: -2.9; 2021: -2.2; 2022: -2.9; 2023: -2.8; 2024: -2.8; 2025: -2.9; 2026: -2.8  
- Primary fiscal balance: 2018: -0.3; 2019: 0.0; 2020: -2.2; 2021: -1.3; 2022: -1.8; 2023: -1.7; 2024: -1.7; 2025: -1.8; 2026: -1.7  
- Current account balance (including official transfers): 2018: -19.5; 2019: -10.8; 2020: -13.7; 2021: -9.3; 2022: -11.6; 2023: -12.5; 2024: -12.8; 2025: -9.5; 2026: -8.2  
- Overall balance (external): 2018: 1.6; 2019: 1.9; 2020: -0.9; 2021: 0.6; 2022: 1.1; 2023: 1.4; 2024: 1.3; 2025: 1.4; 2026: 1.4  
- Gross public debt: 2018: 38.6; 2019: 38.0; 2020: 43.4; 2021: 43.3; 2022: 42.9; 2023: 42.5; 2024: 42.3; 2025: 42.3; 2026: 41.9

*International Monetary Fund staff report excerpt from the Guinea country document.*

### 30.      Fiscal policy must be calibrated to preserve debt sustainability, supported by a

### 1ginea2021001 - 30.      Fiscal policy must be calibrated to preserve debt sustainability, supported by a

### Fiscal position, debt sustainability, and borrowing strategy
- Public debt rose sharply to 43.4 percent of GDP in 2020 reflecting additional borrowing to meet urgent fiscal needs related to the pandemic, and the first disbursement for the Souapiti hydropower project, which was received at the end of the year.
- Projection and risk assessment:
  - A stronger fiscal balance, strong growth, and increased reliance on concessional financing are expected to set public debt on a firmly declining path starting in 2021.
  - Guinea remaining at moderate risk of overall and external debt distress.
- Policy guidance and institutional actions:
  - Continue improving debt management practices through regular issuance of Treasury instruments in the domestic market.
  - Maintain a realistic envelope for externally-financed public investment projects that will maintain a moderate risk of debt distress; this envelope is more moderate than what was envisaged before the pandemic.
  - With World Bank assistance, broaden the perimeter of public debt reporting to include state-owned enterprises.

### Authorities’ views on fiscal strategy and debt
- Agreement with the need to:
  - Strengthen social protection.
  - Enhance investment in human capital.
  - Continue strengthening Public Investment Management (PIM) and Public Financial Management (PFM).
  - Pursue reforms to eliminate subsidies.
- On the Debt Sustainability Analysis (DSA):
  - Authorities committed to preserving a moderate risk of debt distress while underscoring the need to finance substantial public investment for development.
  - Authorities view risks associated with loans for large infrastructure projects as somewhat more benign because these are to be serviced by SPVs using operational revenues.

### Monetary policy, advances, and inflation
- Repayment of central bank advances:
  - Repayment of the advances should help reduce the monetary base and thus alleviate inflationary pressures.
  - Staff welcomes corrective measures taken at end-2020 to reduce advances and sterilization issuances that contributed to reducing base money growth by about half.
  - Staff recommends continuation of the repayment process with at least 0.7 percent of GDP in 2021 (¶15).
  - Bringing the stock of advances to zero over the medium term will increase the financial autonomy of the central bank.
- Monetary policy stance and framework:
  - Staff welcomes the Monetary Policy Committee’s (MPC) March 2021 decision to maintain its modestly accommodative policy stance to support the economic recovery.
  - Strengthening monetary policy transmission is needed to pave the way for migration towards an interest rate-based targeting framework.
  - Need for active liquidity management despite BCRG concerns about the cost of monetary policy and its impact on their balance sheet.
  - High unremunerated reserve requirement of 16 percent overly restricts commercial banks’ ability to lend and acts as a tax on financial intermediation.
- Staff recommendations to improve effectiveness:
  - More frequent recourse to open market operations allocated at fixed rate (the policy rate) and full allotment.
  - Reduction of the reserve requirement ratio to internationally comparable levels to reduce the cost of financial intermediation and free up resources.
  - Ensure interest payments from the 2018 recapitalization contribute to strengthening the central bank’s capital position.
  - Advise the Treasury to avoid seeking advances from BCRG for budget financing, abide by legal provisions to repay new advances within 92 days, and remunerate outstanding advances.

### Exchange rate, external position, and reserves
- Exchange rate policy and real exchange rate:
  - The real exchange rate continued to appreciate in 2021 despite the BCRG’s more flexible exchange rate policy.
  - Since November 2020, BCRG implemented a rules-based FX intervention policy with auctions conditioned on market volatility; this increased transparency/coherence and reduced the premium in the parallel market which had approached 2 percent in 2019-2020.
  - High inflation has led to continued real appreciation of the Guinean franc.
- Reserves and external vulnerabilities:
  - BCRG accumulated reserves reaching US $1,355m at end-2020.
  - This level corresponds to 2.2 months of prospective imports and is assessed to be broadly adequate for precautionary purposes (Annex VII).
  - Given dependence on commodity exports—which make up over 90 percent of total exports—Guinea is vulnerable to global price shocks.
  - Staff recommends pursuing gradual accumulation of reserves to reach at least 3 months of reserve coverage.
  - Reserves are expected to continue rising moderately, reaching 3.0 months of prospective imports in 2026.
  - To reduce the current account deficit, inflation must be reduced over the medium term to support gradual realignment of the real exchange rate and improve non-mining competitiveness.

### Authorities’ views on monetary and external policy
- Authorities broadly agree with staff recommendations.
- They consider the current inflation spike to be fundamentally an imported inflation phenomenon.
- They agree with most suggestions to strengthen the monetary policy framework and are satisfied with the rule-based FX intervention policy.

### Financial sector stability and reforms
- Implementation status:
  - Progress in implementing the 2019 Financial Sector Stability Review (FSSR) recommendations is slow.
  - Priority areas: financial safety nets and contingency planning to strengthen stability framework while unwinding COVID-19 measures.
- Recommendations for the banking sector:
  - Remove extraordinary support measures as the pandemic subsides.
  - Restore the prudential framework by requiring banks to reclassify NPLs and provision to fully reflect true asset quality.
  - BCRG should intensify supervisory monitoring, take appropriate action if required, and encourage banks to conduct viability assessments and take prompt recovery action.
  - Consider phasing-in arrangements to avoid sudden increases in NPLs and provisioning.
  - Increase resources assigned to banking supervision.
  - Staff advises BCRG to divest its stake in the development bank to limit financial and reputational risks.
- Financial inclusion and consumer protection:
  - Adoption of the 2020-23 National Strategy for Financial Inclusion (NSFI) is forthcoming with World Bank support; NSFI expects to improve access for SMEs, youth, and women and develop mobile money services.
- AML/CFT developments:
  - Promulgation of the AML/CFT law is positive.
  - Next steps: develop implementing regulations, strengthen operational independence of the financial intelligence unit, prioritize measures to identify and deter corruption, complete an AML/CFT strategy, and transition to a risk-based approach to AML/CFT supervision under BCRG.

### Authorities’ views on financial sector
- Authorities broadly agree with staff views.
- They believe some prudential measures could be reestablished—including the liquidity coverage ratio and the net open position in foreign exchange.
- Banks are extending moratoria on loan payments case-by-case and some banks have resumed provisioning NPLs.
- Work to develop AML/CFT regulations is under preparation with IMF support.

### Diversification, private sector, and business environment
- Need to leverage natural endowments:
  - Leverage the mining boom and natural endowments (including agriculture and hydropower) to diversify the economy.
  - Mining sector expected to remain the driving force; concentration increases vulnerability and is capital intensive with limited employment generation.
  - Mining sector accounts for just 6 percent of total employment; agriculture employs more than half of the population.
  - Mining companies exploring alumina production (already underway on a small scale).
- Policy priorities to promote diversification:
  - Increase returns to private non-mining investment through enhanced public investment in infrastructure and human capital.
  - Establish a transparent, stable, and conducive business environment with affordable access to finance.
  - Targeted interventions: strengthen access to high-yielding agricultural inputs, better integrate agricultural value chains, enhance agricultural extension and advisory services.
  - Research with DIGNAR-19 model illustrates potential benefits from reorienting growth toward a more labor-intensive, diversified model (Annex V).

### Strengthening the business climate and governance
- Business climate progress:
  - Operationalized commercial court, strengthened public-private dialogue, established a one-stop shop for business registration.
  - Establishing a digital portal for foreign trade and progress migrating the credit information system into a credit bureau.
  - Digitalization is a strategic priority to support private sector growth.
  - Key remaining constraint: operationalize the one-stop-shop for land registration.
  - Continue investing in electricity and transport infrastructure to address bottlenecks.
- Governance, procurement, and transparency:
  - Authorities broadly implementing RCF governance commitments; COVID-related public procurement contracts published in full and information on legal ownership of awarded entities published.
  - Monthly COVID-19 spending reports published online; ex-post audit of COVID-19 procurement underway with plan to meet end-June deadline.
  - Staff encouraged requiring collection and publication of beneficial ownership information of awarded companies and expanding transparency beyond COVID-related spending.
  - Staff recommends legal entities awarded procurement contracts disclose beneficial ownership information and publish it regularly and in a searchable manner.
- Anti-corruption and asset declaration:
  - Good progress upgrading anti-corruption legal and institutional framework, but overall effectiveness requires significant strengthening.
  - Operationalize asset declaration framework as soon as possible; prior regime was repealed and replaced causing delay.
  - Corruption risk reductions recommended through limiting discretion in mining contracts, digitalizing tax administration, strengthening PIM and PFM, enhancing AML/CFT supervision, and digitalizing/simplifying regulatory procedures.

### Authorities’ views on development planning
- Preparing second 5-year national development plan (PNDES II) prioritizing diversification, digitalization, and good governance.
- Prepared National Strategy for the Fight against COVID-19 (SNLC) 2020-2022 due to pandemic impact.
- Authorities emphasize mining sector as catalyst for growth and planned investment to produce higher value-added products.
- Authorities highlight the key role of agriculture and the need to diversify exports away from mining.

### Data, technical assistance, and safeguards
- Data and statistics:
  - Data provision broadly adequate for surveillance, but gaps exist.
  - Completion of the 2018-19 National Household Living Standards Survey welcomed.
  - Urged improvement in recording government finance statistics; national accounts being rebased to 2018 base year.
- IMF technical assistance:
  - As a pilot under the IMF Capacity Building Framework for fragile countries, Guinea is an intense user of Fund technical assistance.
  - IMF TA during 2017-2020 ECF arrangement targeted program objectives and institutional capacity strengthening.
- Safeguards assessment follow-up:
  - Authorities started implementing recommendations from the 2021 safeguards assessment.
  - Areas for improvement: respect limits on monetary financing, timeliness of IFRS financial statements, management of dormant accounts.
  - Increase in monetary financing breached statutory limits; government committed to issue securities with proceeds to bring outstanding amounts back in compliance.
  - BCRG blocked accounts considered dormant and is establishing an ad hoc review committee to close them.
  - IFRS financial statements for 2020 are being prepared.
  - Staff encourages BCRG to strengthen reserves management, Audit Committee oversight, internal audit function, and advance a peer review of currency operations.

### Staff appraisal — key priorities and recommendations
- Growth and social support:
  - Guinea’s growth remains resilient due to a booming mining sector, but continued support to the non-mining sector and vaccine rollout are critical.
  - Maintain support to vulnerable households and targeted private sector support; mobilize grants and concessional borrowing where possible.
  - Given recent spike in inflation, repayment of outstanding central bank advances should continue.
- Monetary framework modernization:
  - Modernizing monetary policy will contribute to price stability and external rebalancing.
  - Active liquidity management and clearer communication of monetary targets will help reduce inflation while sustaining private sector credit.
  - Reducing inflation and continuing the rules-based FX intervention policy will help correct real overvaluation and facilitate structural transformation and diversification.
- Revenue mobilization and natural resource governance:
  - Transforming mining wealth into revenue is the most pressing challenge.
  - Authorities’ approach to strengthening domestic revenue mobilization is welcome.
  - Essential actions: address transfer mispricing, fully apply the Mining Code to new contracts, keep tax exemptions and exonerations to a minimum, and promptly adopt the General Tax Code as discussed during IMF TA.
  - Conduct audit of mining companies is welcome but should not delay action.
- Social safety nets and reforms:
  - Strengthen social safety nets as a permanent feature, not just crisis response.
  - Devote more resources to social protection partly through savings from electricity sector reform to enhance resilience, reduce poverty, and improve productivity.
  - Introduce an automatic fuel price mechanism down the road.

*International Monetary Fund — Guinea staff report content unit*

### 55.      Investing in human capital is a key development priority. Both higher and more efficient

### 1ginea2021001 - 55. Investing in human capital is a key development priority. Both higher and more efficient

### Human capital, education, and health
- Investing in human capital is a key development priority.
- Both higher and more efficient health and education investments are needed to improve productivity, growth prospects and living standards.
- Tilting investment towards primary and secondary education and vocational training is essential.

### Public Financial Management (PFM) and public investment management (PIM)
- Progress to strengthen PFM needs to continue.
- Key actions: extend the scope of the TSA and improve budget planning, execution and reporting through better coordination between the Budget, the Treasury, the Debt departments and the central bank to ensure accurate, transparent and timely reporting.
- Staff encourages prompt finalization and adoption of the PIM Manual, complemented by a decree specifying the key roles and responsibilities of all actors along the three phasis of PIM.
- Continue to be mindful of absorption capacity and debt sustainability considerations when implementing investment plans.

### Debt policy and financing
- Authorities are encouraged to maintain current prudent external borrowing policies, maximizing recourse to concessional financing, to ensure debt remains at moderate risk of distress.
- External public debt, incl. IMF (percent of GDP) projection series: 19.4, 19.9, 23.8, 25.8, 28.4, 28.6, 30.9, 31.6, 32.1, 32.7, 33.0.
- Total public debt, incl. IMF (percent of GDP) projection series: 38.6, 38.0, 40.4, 43.4, 43.2, 43.3, 42.9, 42.5, 42.3, 42.3, 41.9.

### Mining sector, diversification, and linkages
- Guinea’s key development challenge is to leverage the growth of the booming mining sector and diversify its economy.
- There is potential to leverage linkages between mining and the rest of the economy.
- The mining sector can move up the value chain, towards refining of alumina.
- With support to agriculture, agri-business has the potential to become a key engine for sustainable growth.

### Governance, business climate, and financial sector
- Improving the business climate, strengthening the financial sector, and stepping up governance are essential requirements for sustainable, inclusive, private-sector-led growth.
- Strengthening the anti-corruption framework and operationalizing the asset declaration regime are key priorities.
- Governance indicators remain weak and corruption indicators are below the SSA average; Guinea’s Global Competitiveness Index (GCI) score is 46 out of 100 (2019).

### Fiscal stance and key fiscal indicators (selected)
- Overall budget balance, including grants (percent of GDP): -1.1, -0.5, -3.6, -2.9, -2.4, -2.2, -2.9, -2.8, -2.8, -2.9, -2.8.
- Overall budget balance, excluding grants (percent of GDP): -2.5, -1.0, -5.6, -3.9, -3.4, -3.9, -3.4, -3.3, -3.2, -3.3, -2.8.
- Basic fiscal balance (percent of GDP) series: 0.9, 0.6, -2.3, -1.4, 0.5, -0.1, 0.6, 0.8, 0.6, 0.4, 0.5.
- Total revenue and grants (percent of GDP) series: 14.9, 14.4, 14.7, 12.8, 14.4, 14.9, 14.7, 15.2, 15.6, 15.7, 15.7.
- Total expenditure and net lending (percent of GDP) series: 16.0, 14.9, 18.3, 15.7, 16.8, 17.1, 17.6, 18.0, 18.4, 18.6, 18.5.
- Capital expenditure and net lending (percent of GDP) series: 5.1, 3.7, 4.7, 3.2, 5.3, 5.2, 6.1, 6.6, 7.0, 7.0, 7.0.
- Interest payments (percent of GDP) series: 0.8, 0.5, 0.9, 0.7, 0.9, 0.9, 1.0, 1.0, 1.0, 1.0, 1.0.
- Non-mining revenue (percent of GDP) series: 10.8, 12.0, 11.2, 10.2, 11.8, 11.5, 12.2, 12.7, 13.1, 13.2, 13.4.

### Macroeconomic and external highlights (selected)
- GDP at constant prices (annual percentage change) series: 6.4, 5.6, 5.2, 7.1, 5.5, 5.2, 6.1, 5.9, 5.5, 3.5, 5.3.
- Mining GDP (annual percentage change) series: 14.0, 9.4, 18.4, 34.6, 7.6, 7.7, 7.1, 6.3, 6.3, 6.2, 6.3.
- Non-mining GDP (annual percentage change) series: 4.9, 4.9, 2.4, 1.3, 5.0, 4.5, 5.8, 5.7, 5.3, 5.0, 5.0.
- Consumer prices (average) series: 9.8, 9.5, 10.2, 10.6, 8.0, 11.6, 9.9, 8.0, 7.8, 7.8, 7.8.
- Current account balance, including official transfers (percent of GDP) series: -19.5, -10.8, -12.3, -13.7, -14.2, -9.3, -11.6, -12.5, -12.8, -9.5, -8.2.
- Exports, goods and services (US$ millions) series (selected): 4,082.1, 4,130.8, 4,897.9, 8,996.0, 5,183.9, 9,012.6, 8,134.6, 8,534.9, 9,178.3, 9,733.5, 10,439.8.
- Imports, goods and services (US$ millions) series (selected): 6,096.4, 5,026.9, 6,022.6, 9,938.4, 6,481.4, 8,888.8, 7,679.6, 8,146.6, 8,821.3, 9,062.0, 9,381.4.
- Gross available reserves (months of imports) series: 2.3, 2.1, 3.8, 2.2, 4.1, 2.4, 2.5, 2.5, 2.7, 2.9, 3.0.
- Net foreign assets of the central bank (US$ millions) series (selected): 565.6, 843.3, 789.2, 948.5, 865.3, 1,273.9, 1,645.1, 2,055.5, 2,514.3, 3,093.0, 3,704.4.
- Nominal GDP (GNF billions) series: 106,845, 124,109, 146,582, 147,188, 167,155, 172,280, 200,493, 229,543, 261,007, 296,229, 336,195.

### Financial sector and inclusion
- Access to finance remains low, though mobile money access is expanding rapidly (Deposit and Mobile Money Accounts per 1,000 adults time series displayed in source).
- Financial soundness indicators (selected, end of period): Regulatory Capital to Risk-Weighted Assets ranged from 17.89 (2016) to 14.0 (Q4 2020); Non-performing Loans to Total Gross Loans ranged from 9.44 (2016) to 9.4 (Q4 2020); Return on Assets reached 3.8 (Q4 2020); Return on Equity reached 32.1 (Q4 2020).
- Monetary aggregates (selected): Broad money (M2) series (billions of GNF): 24,747; 30,416; 34,571; 37,420; 39,752; 42,538; 50,123; 57,386; 65,163; 74,995; 84,951.

### Institutional recommendation and next steps
- Strengthen PFM and PIM implementation, finalize PIM Manual and complementary decree, and ensure clear role allocation across budgetary and fiscal institutions.
- Maintain prudent external borrowing practices and prioritize concessional financing.
- Focus public investment on education (primary/secondary) and vocational training, and on leveraging mining linkages and agri-business for diversification.
- Staff recommends that the next Article IV consultation with Guinea be held on the standard 12-month cycle.

*Source: IMF staff report content as provided in the supplied PDF excerpt.*

### Annex I. Guinea’s Experience Under the 2017-2020

### Annex I. Guinea’s Experience Under the 2017-2020 ECF-Supported Program

### A. Introduction — Guinea’s and the IMF Engagement
- Guinea engaged with the Fund since shortly after the first democratic elections in 2010, moving from a one-year Staff-Monitored Program in 2011 to an ECF arrangement in February 2012 (extended until November 2016) and a new ECF-supported agreement approved in December 2017.
- The IMF provided emergency assistance under the Rapid Credit Facility and debt relief in 2014 and 2020 to free up resources.
- Ongoing reform priorities: public financial management (PFM) and public investment management (PIM); mobilizing additional domestic revenue including from the mining sector; and enhancing governance and the business environment.
- The two ECF-supported programs built on the authorities’ National Development Plans and were complemented by technical assistance (TA).

### B. 2017–2020 ECF-Supported Program Overview — Objectives and Context
- Program size and objectives:
  - Amount: SDR 120.488 million (about US$170 million, or 56.25 percent of Guinea’s quota).
  - Aimed at: (i) strengthening resilience, (ii) scaling-up public investments while preserving medium-term debt sustainability, (iii) strengthening social safety nets to reduce poverty and foster inclusion, and (iv) promoting private sector development.
- Political and socio-economic context:
  - Episodes of social unrest, protests and strikes in 2018, late 2019, and early 2020.
  - Local elections in February 2018; legislative elections and a contested referendum in early 2020; Presidential elections in October 2020.
  - The electoral cycle influenced public expenditures and, to a lesser extent, revenue mobilization.
- Macroeconomic outcomes during the three-year program:
  - Real GDP growth averaged 5 percent.
  - Mining growth consistently exceeded projections.
  - Inflation remained below 10 percent, though higher than projected.
  - The current account was less negative than anticipated.
  - The stock of foreign exchange reserves doubled.
- Early program performance and corrective measures:
  - Fiscal slippages at end-2017 led to non-observance of three performance criteria and two indicative targets.
  - Causes: revenue shortfalls (including mining and downward adjustment of the tax on petroleum products (TSPP) to keep retail prices constant) and higher-than-projected domestically-financed capital expenditures and election-related spending.
  - A package of adjustment measures of 2.8 percent of GDP was agreed in the first review.
- Subsequent program performance:
  - Performance improved from the second review: all performance criteria met in the second, third and fourth reviews; minor miss in basic balance in the fifth review.
  - End-September 2019 deterioration due to lower-than-programmed tax revenues (lower mining tax and non-mining direct taxes) affected by social tensions, a shock to mining production, and partial implementation of tax measures.
  - Authorities borrowed from the central bank between September and November 2019, with a net repayment at end-2019.
  - Two performance criteria missed in the 6th review in 2020 as authorities resorted to central bank financing to respond to the health crisis ahead of expected COVID-related external disbursements.
- Indicative targets:
  - Floor on domestically financed social safety programs was missed in two reviews.
  - Tax revenue indicative target was missed consistently in every review but one.

### C. Projections vs Outturns During the Program — Key Sectoral Outcomes
- Growth:
  - Buoyant mining activity in 2016–18 and 2020 supported higher-than-projected growth.
  - In 2019 mining was disrupted by severe weather in Q3; 2020 growth surprised on the upside due to booming mining production despite COVID effects on non-mining sectors.
- Inflation:
  - CPI was generally higher than projected throughout the ECF arrangement period and aggravated by pandemic-related containment measures.
- Tax revenue:
  - Increasing the tax-to-GDP ratio was not achieved; systematic underachievement in the tax revenue indicative target.
  - Contributing factors: social tensions impacting activity; ad-hoc downward adjustments to the TSPP in 2017; delays and partial implementation of tax revenue mobilization measures, including electronic tax controls and collection.
- Capital expenditure:
  - Ambitious infrastructure program but under-execution of domestically and externally financed capital expenditure.
  - Main causes: low implementation capacity, delays in procurement, contract management, compensation.
  - Program and TA focused on building PIM capacity and strengthening controls.
- Safety nets spending:
  - Targets met in the second part of the program after shortfalls in the first and second reviews.
  - A prototype registry of vulnerable populations was established with World Bank support.
- Current spending:
  - Generally below projections except in 2020 due to COVID-19; electricity subsidies and transfers were at times higher than projected.
- Basic balance:
  - First-review fiscal balance was significantly worse than programmed; thereafter program objectives were largely met, though 2019 outturns were slightly worse than expected at time of first review.
  - Lower-than-programmed capital expenditures and slightly lower current expenditures generally compensated for revenue shortfalls.
  - Exception: 2020 COVID-related large basic fiscal deficit.
- Debt and central bank financing:
  - NCB ceiling respected; Guinea remained at moderate risk of debt distress.
  - Judgment was invoked since the second review to override an automatic high risk of debt distress due to a brief and marginal breach in the PV of total public debt-to-GDP ratio over 2019–20, reflecting one-off recapitalization of the central bank.
  - Reliance on borrowing from the central bank was higher than planned in 2017 and in 2020 (front-loading of COVID spending and delays in external support).

### D. Structural Performance — Reforms, Achievements, and Gaps
- Achievements under the program:
  - Improvements in public financial management.
  - Adoption of an electricity tariff reform strategy.
  - Implementation of a rules-based FX intervention policy.
  - Improved governance with adoption of a new asset declaration regime.
- Structural measures not enacted (key reasons: political instability, COVID-19, capacity constraints, TA access difficulties):
  - Reinstating the automatic adjustment mechanism for petroleum product prices, in line with international market prices and the exchange rate, to mitigate impacts on tax revenues.
  - Finalizing decrees establishing a regulatory framework and clarifying responsibilities of major public sector actors across phases of public investment management.
  - Adopting a manual for preparation, appraisal, and selection of investment projects requiring feasibility studies and rigorous processes.
- Progress after the 2017–20 arrangement:
  - PIM Manual prepared with IMF TA support is being finalized and expected to be adopted by the Council of Ministers.
  - Authorities prepared a guide for project maturation.
  - A decree clarifying roles and responsibilities of all actors in the three phases of public investment management remains necessary.

### Conclusions and Key Takeaways
- Overall assessment:
  - Guinea’s performance under the ECF-supported program was generally satisfactory; most performance criteria were met and the program supported growth and development.
- Major takeaways:
  - Social unrest, political turbulence, and institutional weaknesses affected program performance and limited the success of Fund engagement.
  - Positive growth surprises in mining were not matched by tax collection improvements; despite expected doubling in mining output growth, mining tax revenue only increased by 0.1 ppt of GDP compared to pre-crisis projections, partly because many new companies benefit from exonerations and exemptions.
  - Recent revenue mobilization measures are welcome and should be complemented by mining sector revenue reform.
  - Revenue underperformance was sometimes due to decisions to subsidize fuel prices; establishing an automatic fuel price mechanism is essential to preserve and stabilize revenues.
  - Inflation was generally higher than projected; continued work to modernize the monetary policy framework and consistent implementation is critical to anchor inflation expectations and reduce inflation.
  - The Fund program and its debt limits policy were not a hindrance to infrastructure spending; actual expenditure was lower than planned. Improving PIM and implementation capacity remains essential.
- Lessons going forward:
  - Program targets should be ambitious but realistic; flexibility to adjust macroeconomic policies and targets to shocks is warranted. Adjustors should consider risks to external and domestic shocks.
  - Structural reforms should consider capacity constraints and fragility; strong reform ownership is key. The number of structural benchmarks in new programs should focus on key priorities, complemented by TA when needed.
  - Addressing non-mining sector bottlenecks is critical to diversify growth, reduce vulnerability to exogenous shocks, and foster sustainable, inclusive medium-term growth that creates jobs and reduces poverty.

### Authorities’ Views
- The authorities broadly agreed with the assessment, noted the ECF arrangement’s support for macroeconomic stability, acknowledged reform challenges, and expressed commitment to continuing needed reforms.

*Source: Annex I. Guinea’s Experience Under the 2017-2020 ECF-Supported Program.*

### 2.      Large FDI-financed mining projects are also expected to involve substantial

### 1ginea2021001 - 2.      Large FDI-financed mining projects are also expected to involve substantial

### Mining projects and infrastructure
- Large FDI-financed mining projects involve substantial infrastructure components.
- Example: the Guinea Aluminum Corporation project invested roughly $1.4bn in port facilities and a railway line.
- Simandou blocks 1 and 2 (world’s largest iron ore mine) was tendered to a China-Guinea-Singapore consortium; the project is:
  - estimated at over 150 percent of GDP,
  - with expected FDI worth $15bn over the next 15 years,
  - involves construction of a railway running 650km across the country, connecting the mine with a new port near Conakry,
  - involves construction of a port.
- Relevant financing/inclusion notes:
  - These loans were financed on non-concessional terms and involved collateralization with unrelated revenue streams.
  - Given their importance, they were included within the ECF-supported program’s US $650m ceiling on the signature of non-concessional loans.
  - Given insufficient information, the baseline does not fully include the Simandou project; only some FDI and growth related to the construction of a railway and port are included at this stage.

### Risk Assessment Matrix — Conjunctural shocks and scenarios
- Unexpected shifts in the COVID-19 pandemic
  - Likelihood: Medium
  - Expected Impact if Realized: Medium
  - Policy response highlights: Create fiscal space for scaling-up health spending and targeted mitigation measures; protect the most vulnerable through targeted measures.
  - Prolonged pandemic scenario:
    - Likelihood: Medium
    - Expected Impact if Realized: High
    - Effect: A second wave could lead to stricter containment measures.
  - Faster containment scenario:
    - Likelihood: Medium
    - Expected Impact if Realized: Medium
    - Effect: Non-mining economy would bounce back faster than expected.
- Sharp rise in global risk premia
  - Likelihood: Medium
  - Expected Impact if Realized: Medium
  - Effect: Demand for mining exports could weaken and mining investments could be delayed.
  - Policy response: Allow exchange rate to depreciate; condition sale of reserves on rule-based FX intervention policy.
- Oversupply and volatility in the oil market
  - Likelihood: Medium
  - Expected Impact if Realized: Medium
  - Effect: Lower (higher) oil prices would increase (reduce) tax revenues and improve (worsen) the balance of payments, with unchanged retail prices.
  - Policy response: Implement automatic price adjustment mechanism for petroleum products; build external buffers; allow greater exchange rate flexibility.
- Intensified geopolitical tensions and security risks
  - Likelihood: High
  - Expected Impact if Realized: Medium
  - Effect: Mining investment projects would likely be postponed, weakening medium-term growth prospects.
  - Policy response: Intensify structural reform to remove bottlenecks to growth and support economic diversification; create fiscal space to scale-up priority spending.

### Structural risks and domestic vulnerabilities
- Climate and natural disasters
  - Likelihood: Medium/Low
  - Expected Impact if Realized: Medium
  - Effect: Rising sea level, extreme precipitation, and drought could affect food production and livelihoods.
  - Policy response: Build resilience for adaptation to climate change in agriculture and rural livelihoods.
- Adverse shock to global commodity prices
  - Likelihood: Medium
  - Expected Impact if Realized: Medium
  - Effect: A decline in global aluminum, gold or iron prices could reduce mining production and exports revenues and delay investments.
  - Policy response: Allow exchange rate depreciation, condition sales of reserves on the FX rule; continue efforts to diversify the economy.
- Adverse shift in the Ebola outbreak
  - Likelihood: Medium
  - Expected Impact if Realized: Medium
  - Effect: Unsuccessful control would disrupt economic activity and reduce growth and tax revenues.
  - Policy response: Accelerate vaccine deployment and mobilize external support; conduct public communication on the vaccine plan and prevention rules.
- Risks of political and social instability
  - Likelihood: Medium
  - Expected Impact if Realized: High
  - Effect: Investment and growth could be affected; macroeconomic stability could deteriorate.
  - Policy response: Focus reforms on areas less sensitive to socio-political environment; ensure transparency in vaccine deployment; improve inclusiveness of government policies.

### Diversification and medium-term growth prospects
- Resource and sectoral context:
  - Guinea has almost one third of the world’s bauxite reserves, large gold reserves, and the world’s largest unexploited iron ore deposits.
  - The mining sector has been growing rapidly since 2016.
  - The sector currently accounts for less than 6 percent of total employment and contributes less than ¼ of total GDP, with benefits concentrated among a relatively small share of the country.
- Strategic objective: Energizing the non-mining sector is critical to create jobs, reduce poverty, and reduce vulnerability to exogenous shocks and competition from other market players.
- Potential synergies:
  - Linkages between mining and agribusiness and hydropower.
  - Local suppliers could benefit from local content sourcing and infrastructure along mining corridors to reach regional markets.

### DIGNAR-19 model: downside scenario (calibration and impacts)
- Model features: financially constrained households; three sectors (bauxite, nontraded goods, non-bauxite traded goods); government with fiscal instruments and debt.
- Downside scenario shocks incorporated:
  - a 24 percent decline in mining prices in 2021 relative to the baseline,
  - a 10 percent decline in mining exports in 2021 relative to the baseline,
  - a 2 percent decline in labor supply (simulating movement restrictions and increased mortality).
  - Both the price and export shocks are assumed to fade in the short term, with bauxite prices and exports recovering to baseline levels by 2024; labor supply recovers fully by 2023.
- Downside scenario macro impacts:
  - GDP growth would be 4.6 percentage points lower than the baseline in 2021 and 1.6 percentage points lower in 2022.
  - Public debt would reach nearly 50 percent of GDP by 2022 and remain elevated relative to the baseline throughout the medium term if fiscal consolidation is absent.
  - Lower mining prices and exports increase debt by reducing government revenues and via valuation effects of external debt through real exchange rate depreciation.

### Policy and reform channels to enable diversification
- Increase returns on non-mining private investment via:
  - Improving public investment efficiency to increase absorption capacity and accelerate implementation of critical infrastructure projects.
    - The recent completion of the public investment manual is a key step; implementation would improve project appraisal, implementation, and sequencing.
    - Staff simulation: assume Guinea could close half of the gap with the median Sub-Saharan African country by 2024.
    - The upside scenario incorporates a 1 percent of GDP increase in public investment, relative to the baseline, beginning in 2022.
  - Strengthening the business climate and governance.
    - Recent progress: expansion of the credit information system and installation of the commercial court.
    - Further reforms: implement land registry and foreign trade portal; digitalization reforms; implement AML/CFT regime; initiate asset declaration regime.
    - Model incorporates a 1.7 percent increase in private investment over the medium term.
  - Developing human capital by reducing the cost of primary and secondary education to stimulate labor productivity.
  - Increasing domestic revenue mobilization:
    - Staff incorporate revenue increases reaching 3.5 percent of GDP over the medium term relative to the baseline, starting in 2022.
    - The increase supports acceleration of public investment and an increase of social safety nets ramping up to 0.5 percent of GDP above the baseline by 2025.

### DIGNAR-19 model: upside scenario (reform sequencing and impacts)
- Upside scenario reform sequence:
  - Implement public investment manual and improvements in governance and the business climate.
  - Next year, increased efficiency allows higher levels of public investment continued over the medium term.
  - Simultaneous increased revenue mobilization and expansion of social transfers.
- Upside scenario macro impacts:
  - Market reforms combined with higher and more efficient public investment would increase non-mining and total growth by 2.6 percentage points by 2026, compared to the baseline.
  - The package raises productivity of labor, fuels employment, raises real wages in the non-mining sector, and increases private consumption expenditure.
  - Social transfers increase human capital and allow vulnerable households to consume more.
  - Government debt sustainability improves and falls below the pre-pandemic level by 2024, facilitated primarily by stronger revenue mobilization and higher growth levels.

### Comparative insight and strategic implications
- Mining-led growth provides high wages and government revenue but limited employment generation and high vulnerability to external shocks, particularly under COVID-19.
- Diversification reforms would provide a more stable, inclusive foundation for growth and contribute more to poverty reduction.
- Complementing the reform agenda with greater domestic revenue mobilization would support increased capital and social expenditure without risking debt sustainability.
- Policy alignment: staff welcome that the second national development strategy (PNDES II), under preparation, is expected to place greater emphasis on attracting non-mining FDI, diversification, and human capital development.

*International Monetary Fund — Guinea staff report content unit*

### 2.      Prices have remained unchanged for

### 1ginea2021001 - 2.      Prices have remained unchanged for

### Petroleum price policy and fiscal implications
- Authorities shielded consumers from price volatility by bearing volatility on government revenue, adjusting the special tax on petroleum products (TSPP) to close the gap between the official and the formula prices.
- Maintaining constant pump prices at times of rising import prices also required revising customs duties downwards.
- Both reductions in TSPP and in custom duties can incite significant revenue losses and lead to sizeable fuel subsidies.

### 2018 price adjustment and social unrest
- The oil import price surge in 2018 led to significant subsidies, with the TSPP level being set at zero, leading to fiscal losses worth 0.6 percent of GDP.
- Guinea increased official prices by 25 percent in 2018; the abrupt price change coincided with local elections and heightened political tensions, resulting in a period of social unrest.
- Since 2018, Guinea has employed modest changes to end-user petroleum prices through ad-hoc adjustments to petroleum taxes with a lagged effect.

### 2020 TSPP revenue windfall and retail price actions
- During the 2020 global oil shock, retail prices in Guinea were reduced by 5 percent in April 2020 and another 5 percent in June 2020.
- Despite retail price reductions, the TSPP recorded a record 1,633 billion GNF in revenues in 2020—an 83 percent increase from the previous year and 1.3 in percent of GDP.
- As of May 2021, retail prices remained at June 2020 levels of 9,000 GNF per liter, despite rapidly recovering international prices and the criteria for triggering a price change having been met as of January 2021.
- Guinea’s retail prices are currently on par with those of its peers (as of March 1, 2021; USD/Liter).

### IMF technical assistance and automatic pricing mechanism
- IMF Staff provided TA during the 2017 ECF-supported program on designing an automatic petroleum price adjustment mechanism specific to countries in a fragile social context; findings and recommendations of the TA were presented to the authorities in the form of a TA report in April 2020.
- Advantages of an automatic adjustment mechanism cited by Staff:
  - Enhancing transparency and predictability.
  - Enhancing revenue mobilization efforts.
  - Making expenditure more efficient, since fuel subsidies are highly regressive with final consumption concentrated at high-income households.

### Recommendations for implementing automatic pricing
- Implement an automatic petroleum pricing mechanism with smoothing.
- Conduct an effective and phased communication campaign to normalize retail price changes among consumers.
- Orient efficiency gains of the automatic adjustment mechanism towards income-supporting measures, such as cash transfer programs to mitigate the impact of fuel price fluctuations on the most vulnerable households.
- Prioritize establishing the mechanism once the COVID-19 pandemic begins to abate; the original planned timeline was by June 2020, but this was delayed due to pandemic response efforts.

### Key figures and chronology (preserved verbatim)
- 0.6 percent of GDP (fiscal losses in 2018 when TSPP set at zero).
- 25 percent (official price increase in 2018).
- 5 percent (retail price reduction in April 2020).
- 5 percent (retail price reduction in June 2020).
- 1,633 billion GNF (TSPP revenues in 2020).
- 83 percent (increase in TSPP revenues from the previous year).
- 1.3 in percent of GDP (TSPP revenues in 2020).
- 9,000 GNF per liter (retail price level as of June 2020 and May 2021).
- January 2021 (criteria for triggering a price change were met).
- April 2020 (TA report presentation to authorities).
- June 2020 (original planned timeline for adopting automatic price adjustment mechanism).

*Prepared by Ornella Kaze (AFR).*

### 4. a) Clarify BCRG’s

### 1ginea2021001 - 4. a) Clarify BCRG’s

### Macroprudential mandate and liquidity management
- Recommendation 4.a) Clarify BCRG’s macroprudential mandate in the BCRG Statute; 4.b) Establish an institutional framework for macroprudential policy.
  - Timeline*: MT
  - Priority: Medium
  - Status: In progress. These are considered in the draft revised BCRG law.
  - Note: Systemic liquidity assessment (mentioned adjacent to mandate clarification).

- Recommendation 5. Implement the past recommendations on liquidity management.
  - Timeline*: ST
  - Priority: High
  - Status: In progress. BCRG established a liquidity committee and a team to forecast autonomous liquidity factors in August 2018. The instruction on required reserves has been signed.

- Recommendation 6. Establish a structured and ranked collateral framework.
  - Timeline*: MT
  - Priority: High
  - Status: Not started. The TA has been delayed due to COVID-19.

- Recommendation 7. Establish an operational framework for the ELA.
  - Timeline*: MT
  - Priority: High
  - Status: In progress. The instruction on emergency liquidity assistance has been signed in 2019. The operational framework has not yet been put in place.

### Financial market infrastructures
- Recommendation 8.a) Adopt a payments law guaranteeing: (i) the legal validity of clearing; (ii) payment finality; and (iii) the protection of holders of collateral.
- Recommendation 8.b) Adopt a regulation guaranteeing the end-of-day settlement operations of the clearing system.
  - Timeline*: ST
  - Priority: High
  - Status: Not started.

- Recommendation 9.a) Support the introduction of a “switch”.
- Recommendation 9.b) Establish a national payments committee.
  - Timeline*: MT
  - Priority: High
  - Status: Not started.

- Recommendation 10. Establish an organizational structure for payment systems oversight.
  - Timeline*: MT
  - Priority: Medium
  - Status: Not started.

- Recommendation 11.a) Discourage the use of high-value checks.
- Recommendation 11.b) Enhance the check clearing mechanism.
  - Timeline*: MT
  - Priority: Medium
  - Status: Not started.

### Banking regulation and supervision
- Recommendation 12.a) Increase the resources assigned to banking supervision.
  - Timeline*: ST/MT
  - Priority: High
  - Status: Not started.

- Recommendation 12.b) Enhance risk-based supervision (RBS) and the reporting system.
  - (No separate timeline/priority/status line beyond continuation of Recommendation 12).

- Recommendation 13.a) Enhance BCRG’s banking supervision mandate in the Banking Law.
  - Timeline*: MT
  - Priority: High
  - Status: In progress. The revision of the banking law has been delayed due to COVID-19.

- Recommendation 13.b) Include in the Law specific provisions for development banks.
  - Status: In progress. A comparative study on the banking law of the WAMZ is underway.

- Recommendation 13.c) Divest BCRG’s stake in the development bank.
  - Status: Not started. BCRG plans to divest its 30 percent stake as soon as it finds a credible investor.

- Recommendation 13.d) Optional: include provisions to allow for Islamic banking.
  - Status: In progress. The revision of the banking law has been delayed due to COVID-19.

- Recommendation 14.a) Implement the relevant parts of the Basel II/III capital framework.
  - Timeline*: MT
  - Priority: Medium
  - Status: In progress. An instruction on capital requirements was prepared with the support of AFW.

- Recommendation 14.b) Revise the regulations on large exposures and related parties.
  - Status: Not started.

- Recommendation 14.c) Complete the cross-border cooperation agreements for all banks.
  - Status: In progress. BCRG has initiated cooperation agreements with the central bank of Mauritania and the Central Bank of Central African States (BEAC).

- Recommendation 15.a) Implement the relevant parts of the Basel II/III liquidity framework.
  - Status: Not started.

- Recommendation 15.b) Enhance the regulations on governance and risk management.
  - Status: Not started.

- Recommendation 15.c) Introduce requirements for Interest Rate Risk in the Banking Book (IRRBB) and country and transfer risks.
  - Status: Not started.

### Crisis management, bank resolution, and financial safety net
- Recommendation 16. Enhance the legal and regulatory framework for deposit insurance.
  - Timeline*: ST
  - Priority: High
  - Status: In progress. The TA from the US Treasury has been postponed due to COVID-19.

- Recommendation 17. Strengthen in the law BCRG’s early intervention powers and tools, including requirements for and capacity to review recovery plans.
  - Timeline*: MT
  - Priority: High
  - Status: In progress. The revision of the banking law has been halted due to COVID-19.

- Recommendation 18. Enhance the resolution related provisions in the Banking Law.
  - Timeline*: MT
  - Priority: High
  - Status: In progress. The revision of the banking law has been halted due to COVID-19.

- Recommendation 19. Increase capacity on resolution and deposit insurance.
  - Timeline*: MT
  - Priority: High
  - Status: Not started.

- Recommendation 20. Establish a body for the coordination of crisis measures.
  - Timeline*: MT
  - Priority: High
  - Status: Not started.

- Note on timelines legend: (*) Con, continuously; ST, short-term, less than six months; MT, medium-term, with results around 18 months; LT, long-term, with results around 30 months.

### Digitalization: financial sector and business environment
- Key findings:
  - A study showed that a 1 percentage point increase in internet use leads to a 0.37 increase in real per capita income growth and that connected firms have 2.6 times more sales and employ eight times as many workers.
  - A World Bank study showed that the number of newly registered firms increased by 56 percent after the introduction of online registration systems. The same study indicated that private companies in Africa using the internet have on average 3.7 times higher labor productivity than nonusers and 35 percent higher total factor productivity.
  - Fixed broadband household penetration in Guinea was 0.01 percent at the end of 2018, below the African regional average (0.6 percent) and the world average (13.6 percent).
  - A World Bank study ranked Guinea 177 out of 180 countries in terms of overall adoption of digitalization, and last in the world regarding business digitalization.

- Policy context and progress:
  - Guinea integrated with the Africa Connects Europe underwater fiber-optic cable since 2014; deployment of more than 4,000km of fiber optic cable was completed in September 2020.
  - Ongoing initiatives: online business and land-registration tools, a credit information system, and a web-based foreign trade portal.
  - Digitalization can boost female labor participation; World Bank studies show women account for just 25 percent of the global non-agricultural work force, growing to over 40 percent when looking at “online” work.

- Digital financial services:
  - The number of adults holding a mobile money account increased from 1.5 percent in 2014 to 13.8 percent in 2017 (World Bank, 2018).
  - The pace of adoption accelerated; the number of subscribers increased by 50 percent over the first nine months of 2020 to 6 at end-September 2020 (Source: BCRG (2020), Discours du Gouverneur à l'Assemblée Nationale, 16 Decembre 2020).
  - Reforms: a new law on digital transactions enacted in 2016 but yet to be implemented; automatic reporting system for electronic money institutions; RTGS launched in 2016; installation of a digital trading platform in 2020.
  - The national strategy for financial inclusion is being revised to incorporate digital financial services.
  - Remaining challenges: lack of interoperability between banks and mobile money operators; operationalization of the electronic payment is expected to be completed in 2021.

- Other public sector digitalization:
  - Introduction of the e-tax system; system to enable digital payments of cash transfers.
  - Digitalization expected to improve public financial management, transparency, accountability, and reduce opportunities for rent seeking and corruption.
  - Recommendation: digitalization and e-filing of asset declarations of senior public officials to facilitate filing and analysis.

### Governance issues and anti-corruption
- Key findings:
  - Guinea’s CPIA score remains unchanged since 2016 at 3.2—barely above the 3.1 IDA average for Sub-Saharan Africa—with the worst performing cluster being Public Sector Management and Institutions.
  - Recurrent unrest and weak institutional capacity contribute to fragility.

- Anti-corruption framework:
  - Progress: national strategy identifies corruption risks in fiscal and procurement sectors; authorities resumed the second review cycle of UNCAC with a self-assessment workshop in March 2021.
  - Recommendations to strengthen effectiveness:
    - Adopt legal frameworks to i) define and develop a system to detect conflict of interests; ii) protect whistle-blowers, witnesses, experts, victims and their relatives; and iii) allow easy access to government information (e.g., budget, contracts, central bank information).
    - Bolster independence, capacity, and financial autonomy of the National Anti-Corruption Agency (ANLC).
    - Criminalize all corruption offenses, enhance direct cooperation among national authorities in charge of detecting and combating corruption, and operationalize the agency responsible for the management and recovery of seized and confiscated assets.

- Transparency in natural resource revenues:
  - As an EITI compliant country, Guinea regularly discloses government revenues from natural resources.
  - In February 2019, the EITI Board determined that Guinea has made meaningful progress in the overall implementation of the EITI Standard.

- Asset declaration regime:
  - Two decrees establishing a framework for asset declaration were published in March 2020; asset declaration forms published in November 2020.
  - The Constitutional Court repealed the two decrees and replaced them with a broadly similar regime, delaying implementation.
  - Recommendation: accelerate operationalization of the asset declaration regime.

- Fiscal governance:
  - Treasury Single Account operationalized in 2019 and expanded in 2020.
  - Public investment management strengthened through an integrated project management platform and a manual for preparation, appraisal and selection of investment projects.
  - A new public procurement code entered into force in September 2020.

### Capacity building and IMF technical assistance (TA)
- Overview of TA delivery (January 2018 – December 2020):
  - Guinea received 76 missions (39 from AFRITAC West and 37 missions from HQ, including two resident long-term experts (LTX)).
  - IMF TA focused on: tax policy and administration, public expenditures and investment management, treasury single account and cash management, government finance statistics, national accounts, the monetary policy framework, reserves accumulation strategy, debt management, external sector and monetary statistics, banking supervision, the anti-corruption framework and the AML/CFT regime.
  - Delivery channels: TA missions from headquarters and AFRITAC West, resident long-term experts at the Ministry of Economy and Finance and the Ministry of Budget, a regional advisor for fragile countries, training workshops, and participation in ICD training courses.

- Achievements and implementation:
  - Public financial management strategy and PREFIP 2019-2022 adopted in December 2018.
  - Treasury Single Account operationalized in 2019 and expanded in 2020 with IMF TA.
  - Monetary policy framework and foreign exchange accumulation recommendations implemented by the Central Bank.
  - New organizational structure for the National Tax Directorate adopted and operationalized in 2021; E-tax rolled out and expected to be fully functional by end-June 2021.
  - Anti-corruption framework strengthened but asset declaration implementation delayed.
  - Authorities working on strengthening units tasked with monitoring implementation of structural reforms, including IMF TA-supported reforms.

*Italic line: Source: IMF country report content provided in the supplied PDF excerpt.*

### 4.      IMF TA will continue to support the authorities’ macroeconomic management

### 4.      IMF TA will continue to support the authorities’ macroeconomic management

### IMF technical assistance objectives and near-term priorities
- Primary objectives of TA support:
  - Preserving macroeconomic stability.
  - Scaling-up public investments in infrastructure to put the economy on a higher growth path and support economic diversification while preserving macroeconomic stability and debt sustainability.
  - Strengthening social safety net programs.
  - Advancing key structural reforms to foster high and more inclusive growth.
- Over the next 3 years, and in line with the authorities CD priorities, TA is expected to focus on:
  - Domestic revenue mobilization, with a focus on mining revenue.
  - Public financial and public investment management.
  - Strengthening debt management.
  - Improving central bank’s monetary and foreign exchange operations.
  - Strengthening governance.
  - Strengthening macroeconomic statistics, including national accounts and balance of payments.

### CY2020 IMF TA activities (selected)
- Fiscal Affairs:
  - FAD PFM: STX Visit Feb 5-10, 2020.
  - AFW/FAD Tax Administration June 15-26, 2020.
  - FAD PFM: Budget execution and controls, cash management and govt. accounting June 22 - July 3, 2020.
  - FAD Tax Policy: Finalization of the Tax Code June 22 - July 12, 2020.
  - AFW Customs Administration Aug. 17-28, 2020.
- Monetary and Capital Markets / Debt:
  - AFW Banking Supervision June 8-19, 2020.
  - AFW Debt Management: Implementation of the Treasury bond issuance procedures Aug 3-11, 2020.
  - MCM FSSR Jun 11-24, 2019 (listed as related).
- Statistics:
  - AFW GFSM 2014 Jan 21-31, 2020 and June 15-26, 2020.
  - AFW Macro Forecasts June 22-July 10, 2020.
  - AFW National Accounts Sept. 9-20, 2020.
  - STA Monetary and Financial Statistics and FSIs Nov 23 - Dec 13, 2020.

### Key findings on the monetary policy framework and macro outcomes
- Inflation and macro context:
  - Guinea's median inflation of 9.8 percent over 2010-20 was the 15th highest out of the 194 countries included in the World Economic Outlook database.
  - Headline inflation rose by about 3 percentage points to 12.6 percent in February 2021.
  - Inflation in Guinea is highly persistent; estimated exchange rate pass-through to headline inflation is about 0.4 after two years.
- Central bank mandate and governance:
  - BCRG primary mandate: ensure price stability; secondary objective: “supporting the general economic policies of the Government with a view to ensuring sound and sustainable economic growth”.
  - Monetary Policy Committee (MPC) established July 2020; expected to meet at least four times a year; first meeting held March 2021.
  - BCRG interprets price stability as maintaining inflation below 10 percent; medium-term objectives aligned with West African Monetary Zone convergence criteria; longer term aim to bring inflation down to 5 percent.
- Historical policy implementation and outcomes:
  - Under ECF-supported programs, reserve money targeting was used with quantitative performance criteria for net domestic assets and net foreign assets and a ceiling on net government borrowing from the central bank.
  - By 2020, the consumer price index was 6 percent higher than projected at the time of the program request; reserve money was 13 percent higher. By 2021, these gaps are expected to reach 10 percent for both the consumer price index and reserve money.
  - The money multiplier and real money balances evolved aligned with projected paths over the program period.
- Liquidity management tools and interest rates:
  - Liquidity tools include repurchase agreements (repos) for injections and sterilization bills (Titres de Régulation Monétaire) for absorption.
  - Repo operations are carried out at variable-rate with the Monetary Policy Rate (MPR), currently at 11.5 percent as the floor.
  - Collateralized intraday refinancing facility rate: 16.5 percent.
  - Unremunerated reserve requirement: 16 percent.
  - Bank lending-deposit spreads oscillate between 15 and 20 percent.
  - The MPR has been adjusted five times in the past ten years, twice in the past five years; it was reduced by 100 basis points in April 2020.
- Central bank operations and constraints:
  - Sterilization bills were issued only twice over the last three years despite persistent excess liquidity; in November 2020 the central bank issued the equivalent of GNF 995 billion in sterilization bills.
  - Central bank advances to the government have been recurrent and at times exceeded statutory limits; outstanding advances peaked at GNF 5,306 billion (3.6 percent of GDP) at end-August 2020 and declined to GNF 3,180 billion at the end of the year.
  - 2017 recapitalization of the BCRG: US$300 million operation involved issuance of non-marketable Treasury securities that cannot be used for open market operations; interest payments on these recapitalization bonds have been made through issuance of additional non-marketable instruments.
  - Statutory limit on BCRG financing of the government (article 36): must not exceed 5 percent of the three previous years’ fiscal revenues, must be repaid within 92 days, and must be remunerated at a market interest rate. The 2020 statutory limit was about GNF 743.9 billion (0.5 percent of GDP).

### Recommended reforms to strengthen the monetary policy framework
- Short-run measures to strengthen reserve money targeting:
  - Increase frequency of MPC meetings from four to at least six per year.
  - Ensure BCRG staff update models and projections prior to each MPC meeting.
  - Set an operational target for reserve money growth in each MPC meeting.
  - Clearly communicate monetary policy decisions in terms of the reserve money target and avoid references to the policy rate.
  - Provide a clear rationale for policy decisions in terms of the BCRG’s analysis of past and future inflation.
  - Increase the frequency of operations to weekly.
- Medium-term transition toward interest-rate operational framework:
  - Transition to a framework whose operational target is the interest rate rather than monetary aggregates.
  - Use an interest rate reaction function that considers BCRG forecasts for inflation and the global interest rate.
  - Focus communications on explaining policy interest rate decisions.
  - Operations could involve weekly auctions of sterilization bills, offered at a fixed rate equal to the MPR, with full allotment.
  - Reduce the unremunerated reserve requirement from 16 to 10 percent to reduce the effective tax on financial intermediation and strengthen transmission of the policy rate to deposit and lending rates.
- Strengthen operational and financial autonomy of the central bank:
  - Ensure the Treasury services interest payments from the 2018 recapitalization of the BCRG, rather than issuing new non-marketable securities.
  - Pay the market interest rate on all outstanding advances extended to the Treasury.
  - Foster fiscal discipline and limit monetary financing to support price stability.

### Safeguards, statistics, and data issues (selected)
- Safeguards assessment (April 2021) found some steps taken but remaining weaknesses in Board oversight, monetary financing, timeliness of financial statements, management of dormant accounts, and compliance with the investment policy.
  - BCRG actions underway: blocking dormant accounts, establishing an ad hoc committee to review closures, initiating preparation of IFRS financial statements for 2020.
  - Remaining priorities include improving Audit Committee oversight and strengthening internal audit, reserves management, and currency functions.
- Statistical issues:
  - Data provision broadly adequate for surveillance with key shortcomings in national accounts and fiscal statistics.
  - National accounts: incomplete real sector statistics, limited timeliness, need to implement 2008 SNA with 2018 benchmark year, and reconcile artisanal gold production with gold export statistics.
  - CPI covers only Conakry; weight reference period 2002; work ongoing to update CPI weights.
  - Government Finance Statistics: Ministry compiles monthly budgetary central government data on a cash basis for revenue and on commitment and cash basis for expenditure; recent GFS TA (February 2021) provided support in compiling the TOFE and refining GFSM 2014 consistent series.

*Source: IMF staff report content (Annexes and chapter text provided in the source PDF).*

### 2020. The current compilation methodology of the government operations tables (TOFE) needs to be

### 1ginea2021001 - 2020. The current compilation methodology of the government operations tables (TOFE) needs to be 

### TOFE modernization and fiscal statistics
- The current compilation methodology of the government operations tables (TOFE) needs to be modernized; it is currently reconciled with budgetary execution and financing data.
- Production of the TOFE based on GFSM 2014 will require the use of data outside the general accounting system, as the general accounting system "lacks comprehensiveness and timeliness."
- Data availability and coverage issues:
  - Data on extra-budgetary units, local government and central government investments in public and private corporations is available but "will need to be assessed from a GFS perspective."

### Monetary and Financial Statistics (MFS)
- Monetary data compilation and reporting:
  - Monetary data are compiled and shared with the African Department on a monthly basis.
  - Monetary data used to assess the 2017-2020 ECF-supported program performance are certified by an independent external auditor on a regular basis.
  - In November-December 2020, STA provided TA to the BCRG to finalize the reporting of monetary data using the recommended standardized report forms (SRFs).
  - Subsequently, the SRFs were compiled and will be disseminated in IMF’s International Financial Statistics publication (May 2021).
- Financial access and indicators:
  - The BCRG reports data and indicators of the Financial Access Survey (FAS), including the two indicators adopted by the UN to monitor Target 8.10 of the Sustainable Development Goals (SDGs).

### Financial sector surveillance and Financial Soundness Indicators (FSI)
- Compilation and reporting:
  - Financial Soundness Indicators (FSI) are consolidated on a quarterly basis by the BCRG and are reported to the Fund.
  - FSIs are published on the IMF’s FSI website.
- Coverage of FSIs reported:
  - All the core FSIs.
  - 8 encouraged FSIs for deposit takers.
  - 2 encouraged FSI for real estate market.
- Technical assistance and revisions:
  - In November-December 2020, STA provided TA to the BCRG to review the compilation of FSIs.
  - In April 2021 new datasets were disseminated with some revisions in the capital adequacy and profitability ratios.

### External Sector Statistics (ESS)
- Balance of Payments (BoP) compilation:
  - The Central Bank compiles annual Balance of Payments statistics in line with the sixth edition of the Balance of Payments Manual (BPM6).
  - Quality of ESS has improved consistently but the central bank still lacks information from some important data sources to compile the ESS.
- Surveys and data coverage:
  - A balance of payments survey has been implemented with a response rate of over 75 percent.
- Areas needing improvement and TA support:
  - The Central Bank is encouraged to improve the quality of BOP statistics, particularly on imports, the financial account, and the artisanal gold sector.
  - A March 15–26, 2021 TA mission assisted in addressing:
    - Consistency of imports of goods data provided to the IMF’s African Department with data published by the authorities.
    - The recent increase in gold exports.
    - The incorporation of direct investment data in the BOP and the sources of these data, in connection with the complex transactions involved in the construction of the Souapiti hydroelectric plant by a Chinese company.
- Specific data/source recommendations:
  - Customs data on exports of gold are reliable, although the origin of the gold exported should be ascertained.
  - INS should launch a survey of artisanal gold to better evaluate the volume of the domestic production.
  - Gold operators should provide information on the use of the proceeds of gold exports.
  - The chronology and details of all transactions, and positions deriving from the implementation of the loan agreement for the construction of the Souapiti dam, must be made available to the BOP/IIP compilers by the Ministry of Economy and Finance.

### Data standards and dissemination
- Guinea participates in the enhanced General Data Dissemination System (e-GDDS) and its National Summary Data Page has regularly disseminated data to the public since November 2019.
- No data ROSC is available.

### Table of Common Indicators Required for Surveillance (as of May 21, 2021) — selected entries (dates and frequencies preserved exactly)
- Exchange Rates: Date of Latest Information 05/20/2021; Date Received 05/21/2021; Frequency of Data D; Frequency of Reporting D; Frequency of Publication D.
- International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of Latest Information 04/30/2021; Date Received 05/05/20121; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M.
- Reserve/Base money: 04/30/2021; 05/05/2021; M; M; M.
- Broad Money: 04/30/2021; 05/05/2021; M; M; M.
- Central Bank Balance Sheet: 04/30/2021; 05/05/2021; M; M; M.
- Consolidated Balance Sheet of the Banking System: 04/30/2021; 05/05/2021; M; M; M.
- Interest Rates: Date of Latest Information 03/31/2021; Date Received 04/13/2021; Frequency M; Reporting M; Publication M.
- Consumer Price Index: 04/30/2021; 05/20/2021; M; M; M.
- Revenue, Expenditure, Balance and Composition of Financing - Central Government: Date of Latest Information 02/28/2021; Date Received 05/01/2021; Frequency M; Reporting M; Publication M.
- Stocks of Central Government and Central Government - Guaranteed Debt: 12/31/2020; 04/20/2021; A; A; A.
- External Current Account Balance: 12/31/2020; 04/20/2021; Q; Q; A.
- Exports and Imports of Goods and Services: 12/31/2020; 04/20/2021; Q; Q; A.
- GDP/GNP: 12/31/2019; 04/20/2021; A; A; A.
- Gross External Debt: 12/31/2020; 04/20/2021; A; A; A.
- International Investment Position: 12/31/2019; 8/13/2020; A; A; A.

### Debt sustainability — risk assessment and recent developments
- 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: No.
  - DSA prepared with World Bank; Guinea’s debt carrying capacity classified as weak based on the Composite Indicator (CI) under the revised LIC DSF.
- Recent debt developments:
  - Total public debt rose to US$6.4 billion (43.4 percent of GDP) at end-2020, up from US$5.0 billion (38.0 percent of GDP) at end-2019.
  - External public debt: US$3.8 billion (25.8 percent of GDP) at end-2020, up from US$2.6 billion (19.9 percent of GDP) at end-2019.
  - Domestic debt: US$2.6 billion (17.6 percent of GDP) at end-2020, up from $2.4 billion at end-2019.
  - Drivers: frontloading of the first disbursement of the project loan for the Souapiti hydropower project and financing for the government’s response to the COVID-19 pandemic.
  - Note: The stock of domestic debt reported in this DSA is significantly higher than reported by the authorities in the Quarterly Public Debt Bulletin due to a broader definition used in the DSA that includes:
    - unaudited domestic arrears;
    - obligations of the Treasury to the BCRG associated with the 2017 recapitalization;
    - outstanding short-term advances owed to the BCRG.

### Coverage of public debt and contingent liabilities
- Definition of public debt in the DSA covers:
  - Central government debt.
  - Central government-guaranteed debt.
  - Central bank debt contracted on behalf of the government.
- Included items and assumptions:
  - Audited and validated arrears to suppliers over 1982–2013, as well as domestic arrears accumulated and decumulated since then, are included in the baseline; estimated domestic arrears stock was reduced to zero at end-2020.
  - Other public sector debt elements, such as non-guaranteed debt of state-owned enterprises and social security funds, are not included due to data constraints.
  - A contingent liability stress test is performed to enhance DSA robustness.
  - The loan for the Souapiti hydropower project (US$1.2 billion, about 10 percent of 2018 GDP) signed on September 4, 2018, is included in the definition of public and publicly guaranteed debt (PPG) used in the DSA.
  - Per the loan agreement terms, the government is the debtor and assumed to be responsible for servicing the loan in the DSA.
- Coverage checklist and assumptions (as presented):
  - Central government: X (used for analysis).
  - Guarantees (to other entities in the public and private sector, including to SOEs): X.
  - Central bank (borrowed on behalf of the government): X.
  - Other elements and assumed percentages (explicit values preserved):
    - Other elements of the general government not captured in 1.: 0.0percent of GDP
    - SoE's debt (guaranteed and not guaranteed by the government): 1/2percent of GDP2
    - PPP 35 percent of PPP stock1.33
    - Financial market (the default value of 5 percent of GDP is the minimum value)5percent of GDP5
    - Total (2+3+4+5) (in percent of GDP)8.3
  - Default shock description preserved: "The central government, central bank, government-guaranteed debt" and explanation of the 2% of GDP default shock trigger.

### Structure of public and publicly guaranteed debt — selected table highlights (end-of-period)
- Total PPG Debt: 6,394 (Percent of Total 100.0; Percent of GDP 43.4) at end-2020.
- Domestic Debt: 2,593 (40.6 percent of Total; 17.6 percent of GDP) at end-2020.
  - Treasury bills (<12 months): 726 (11.4 percent of Total; 4.9 percent of GDP).
  - Treasury instruments (1-3 years): 93 (3.3 percent of Total; 1.4 percent of GDP).
  - Securitized debt to suppliers: 56 (4.0 percent of Total; 1.7 percent of GDP).
  - BCRG (short-term advances): 73 (1.6 percent of Total; 2.1 percent of GDP).
  - BCRG (long-term obligations): 1,028 (16.1 percent of Total; 7.0 percent of GDP).
  - Misc. (VAT credits; domestic arrears): 58 (0.9 percent of Total; 0.4 percent of GDP).
- External Debt: 3,800 (59.4 percent of Total; 25.8 percent of GDP) at end-2020.
  - Multilateral creditors: 1,737 (27.2 percent of Total; 11.8 percent of GDP).
    - IMF: 208 (3.1 percent of Total; 3.5 percent of GDP).
    - World Bank: 575 (9.0 percent of Total; 3.9 percent of GDP).
    - African Dev. Bank Group: 83 (3.3 percent of Total; 1.4 percent of GDP).
    - Islamic Dev. Bank: 217 (3.4 percent of Total; 1.5 percent of GDP).
  - Official Bilateral Creditors: 1,800 (28.2 percent of Total; 12.2 percent of GDP).
    - Non-Paris Club: 1,759 (27.5 percent of Total; 11.9 percent of GDP).
    - China: 1,277 (20.0 percent of Total; 8.7 percent of GDP).
      - of which: Loan for Souapiti dam: 575 (9.0 percent of Total; 3.9 percent of GDP).
  - Commercial Creditors: 24 (4.1 percent of Total; 1.8 percent of GDP).
    - ICBC: 23 (0.0 reported in earlier columns; 3.2 percent of an indicated subcategory).
- Memo items:
  - C2D balance: 10.8 (0.3 percent of GDP).
  - External Arrears: 164 (2.6 percent of Total; 1.1 percent of GDP).
  - GNF per USD: Official (EOP) 9,990 at end-2020.

### Underlying macroeconomic assumptions (key projections and values)
- Real GDP growth:
  - Estimated at 7.1 percent in 2020.
  - 5.2 percent in 2021.
  - Non-mining domestic economy: growth expected to recover at a rate of 4.5 percent in 2021 after a sharp slowdown to 1.3 percent growth in 2020.
  - Mining sector expected to grow at 7.7 percent in 2021.
  - Growth is expected to converge to its long-run rate of 5 percent only in 2028.
- Risks to the outlook:
  - Tilted to the downside: socio-political tensions, delays in reform implementation, potential deterioration of the sanitary situation depending on the evolution of the pandemic and the Ebola outbreak.
  - Commodity price shocks and lower FDI in mining sector are significant vulnerabilities.
  - Upside risks: mining production capacity coming on stream faster than expected, higher-than-expected artisanal gold production, faster-than-expected FDI investments for railway and port to export iron ore from Simandou.
- Inflation:
  - Rose to 10.6 percent (y-o-y) in 2020.
  - Projected average of 11.6 percent in 2021.
  - Expected to gradually moderate to below 10 percent in 2022.
- Fiscal balance:
  - 2020 overall fiscal deficit at 2.9 percent of GDP.
  - Implementation cost of the COVID-19 response was about 1.5 percent of GDP.
  - Authorities canceled planned-but-unexecuted expenditures at end-2020 amounting to 2.6 percent of GDP (mostly from subsidies and capital expenditure), providing space for a large arrears repayment.

*International Monetary Fund staff report excerpts, Guinea: 2021 Article IV Consultation and Joint Bank-Fund Debt Sustainability Analysis (selected content and figures as provided).*

### 1.7 percent of GDP in 2020, which was unexpected and contributed to support the private

### 1ginea2021001 - 1.7 percent of GDP in 2020, which was unexpected and contributed to support the private

### Fiscal outlook and public debt dynamics
- Primary deficit is expected to average 1.8 percent of GDP over 2022–25, reflecting the authorities’ commitment to scale-up public investment at a more moderate pace than had been planned before the pandemic.
- Pre-pandemic plans for externally-financed projects in 2021-23 have been scaled back to preserve debt sustainability.
- Continued revenue mobilization efforts, supported by TA, are expected to gradually increase tax revenue by 2.9 percent of GDP over 2021–30.
- Grants rose to 1.0 percent of GDP in 2020 and are expected to rise in 2021 to 1.5 percent of GDP.
- DSA includes confirmed grants (by multilateral development banks) averaging 0.5 percent of GDP over 2022–25 and zero afterwards; the difference is assumed to be provided as concessional loans and some reductions in expenditure.
- The PV of total public debt-to-GDP ratio peaked in 2020 at 36.8 percent of GDP (benchmark: 35 percent of GDP), is expected to fall to 35.5 percent of GDP in 2021 and to 34.3 percent of GDP in 2022.
- The envisaged post-pandemic fiscal adjustment of 0.7 percent of GDP over 2020-23 is considered feasible for Guinea.

### Revenue mobilization, tax reforms, and administration measures
- Reforms are expected to reinvigorate tax policy and tax administration, intensifying ongoing work on:
  - digitalizing tax management,
  - matching of tax and customs databases,
  - fully operationalizing the new organizational structure of the DNI,
  - adopting the revised General Tax Code in line with IMF TA.

### Current account and balance of payments
- Current account deficit (including transfers) contracted to a deficit of 13.7 percent of GDP in 2020 and is expected to fall to 9.3 percent of GDP in 2021.
- Strong FDI and project loan inflows are expected to continue financing the current account.
- Exports boomed in 2020 due to Chinese demand for bauxite and favorable world commodity prices; imports of capital goods for mining and public infrastructure projects remain strong.
- Strong mining investment is expected to widen the current account deficit to an average of 12.3 percent of GDP over 2022-24, before gradual narrowing over the longer term.
- Table 4 macro assumptions (selected figures, Percent of GDP unless otherwise indicated):
  - Nominal GDP (USD billion): 2021: 16.3, 2022: 17.4, 2026: 22.7, 2031: 31.9.
  - Real GDP (percentage change): 2021: 5.5, 2022: 5.2, 2026: 5.0, 2031: 5.0.
  - Revenues: 2021: 13.4, 2022: 14.2, 2026: 15.1, 2031: 15.9.
  - Grants: 2021: 0.9, 2022: 0.9, 2026: 0.8, 2031: 0.8.
  - Public Sector Expenditure: 2021: 16.8, 2022: 17.3, 2026: 18.4, 2031: 19.1.
  - Capital expenditure and net lending: 2021: 5.4, 2022: 6.1, 2026: 6.5, 2031: 6.3.
  - Primary Fiscal Balance: 2021: -1.5, 2022: -1.3, 2026: -1.4, 2031: -1.4.
  - New external borrowing: 2021: 7.0, 2022: 5.2, 2026: 2.9, 2031: 2.7.
  - Current account (including transfers): 2021: -14.3, 2022: -12.1, 2026: -5.5, 2031: -4.7.
  - Foreign direct investment: 2021: 7.3, 2022: 8.1, 2026: 7.6, 2031: 7.6.

### External financing mix and terms
- Authorities plan to continue mobilizing external financing to scale-up public investments in infrastructure for diversification and broad-based growth.
- New external borrowing is expected to be strong at 5.4 percent of GDP in 2021–22 reflecting infrastructure spending and Souapiti loan disbursement, before moderating to an average of 3.7 percent of GDP over 2023–26.
- Long-run external borrowing is assumed to average about 2.6 percent of GDP per year over 2031–41.
- Average grant element of new borrowing expected to be about 35.6 percent in 2021, increasing to about 41 percent in 2024, and gradually decreasing to 33 percent by 2041.

### Non-concessional, concessional, and pandemic-related financing
- Non-concessional borrowing:
  - Souapiti hydropower project loan first tranche of US$575 million was disbursed at end-2020; remaining disbursements expected to include US$300 million in 2021 and US$300 million in 2022.
  - ICBC project loans: RN1 national road (US$389m) and Conakry urban road network (US$220m); US$194 million had been disbursed by end-2020 with remaining amounts expected to be evenly spread over 2021-23.
  - Additional non-concessional borrowing of about US$251 million assumed to be disbursed during 2023–26.
- Concessional borrowing:
  - World Bank disbursed US$164.0 million in 2020 in concessional financing (budget support and project financing).
  - Concessional project loans from all partners are assumed to total US$3.0 billion over 2021–26.
  - Concessional budget support loans expected to total US$658 million over 2021–26.
- Pandemic-related support:
  - Program loans in support of the COVID-19 response reached 1.3 percent of GDP in 2020, including World Bank (US $51.2m), African Development Bank (US $13.2m), and IMF RCF (US $147.5m).
  - Last disbursement under IMF’s ECF-supported program in December provided US $49.5m in balance of payments support.

### Debt relief, forbearance, and DSSI/CCRT measures
- Guinea received SDR 50.9m in CCRT grants to cover debt service obligations to the Fund over April 14, 2020 to October 15, 2021.
- DSA assumes Guinea will continue to receive grants covering IMF debt service payments falling due between October 16, 2021 and April 13, 2022 (SDR 18.2 million), subject to availability of CCRT resources.
- Under DSSI, US $36.4 million in debt service payments due in 2020 have been rescheduled to 2022-24; extension covers a further US$52.1 million falling due in 2021, to be rescheduled to 2023-25.
- In conjunction with the DSSI, in February 2021 China announced cancellation of a bilateral loan for 150m RMB (US$23m).

### Domestic borrowing and arrears
- In 2020, net issuance of domestic debt to commercial banks reached 2 percent of GDP, with short-term Treasury bills (effective interest rate of 9.7 percent) and 3-year debenture loans (12 percent interest rate).
- Government repaid 1.7 percent of GDP in domestic arrears in 2020, estimated to have brought the outstanding stock to zero at end-2020.
- Outstanding stock of short-term advances from the central bank increased to 2.1 percent of GDP in 2020 from 1.0 percent of GDP in 2019; expected to be gradually repaid over 2021-22.
- Amortization of securitized debt to domestic suppliers will average 0.5 percent of GDP over 2021–22.
- Net issuance of domestic debt to commercial banks expected to remain high at 1.7 percent in 2021, then fluctuate around 1 percent of GDP between 2022-28, before gradually rising in the longer term.

### Realism diagnostics, growth outlook, and policy realism
- Growth of 7.1 percent made Guinea one of the world’s fastest-growing economies in 2020.
- Growth projection of 5.2 percent in 2021 is consistent with April 2021 WEO and reflects mining sector performance (Chinese bauxite demand and booming artisanal gold).
- Execution of public investment was curtailed by the pandemic in 2020; externally financed projects expected to rise strongly in 2021 and 2022 but remain below pre-pandemic projections.
- Framework conservatively assumes a relatively weak investment-growth nexus based on weak historical growth and past adverse conditions (Ebola, commodity shocks, social unrest).
- Overall forecast error for PPG debt to GDP is smaller than the LIC sample median; going forward, primary fiscal deficits expected to be main contributor to debt accumulation.

### Country classification, stress tests, and risk rating
- Composite Indicator (CI) for Guinea is 2.44 based on October 2020 WEO vintage and 2019 CPIA update, classifying Guinea at weak debt-carrying capacity.
- Two tailored stress tests triggered:
  - Contingent liabilities stress test capturing combined shock from SOEs’ external debt default, PPP distress/cancellations, and financial market vulnerabilities amounting to 8.3 percent of GDP.
  - Commodity prices stress test applied because mining exports constitute more than 80 percent of total exports.
- Two fully customized scenarios performed: (i) weak policy scenario; (ii) higher non-concessional borrowing.
- External debt assessment:
  - 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 23.1 percent of GDP in 2027 (above 21.8 percent peak in December 2020 DSA) then decline.
  - Liquidity ratios expected to remain well below thresholds.
- Extreme stress test (negative shock to exports) causes all external debt indicators to breach thresholds over full forecast horizon; in the lower exports scenario, all four indicators exceed more than double their thresholds.
- Overall risk of public debt distress assessed as moderate.
  - Under baseline, PV of total public debt-to-GDP breaches benchmark in 2021 (single projection year) due to frontloading of Souapiti loan disbursement.
  - Most extreme shock produces PV of total debt-to-GDP reaching 66 percent in 2023 before falling gradually.
- Risks to debt dynamics include protracted pandemic, delays in repaying domestic arrears or debt owed to BCRG, higher-than-anticipated government borrowing, and new audits confirming higher domestic arrears.

*Source: IMF staff and Guinean authorities content as presented in the provided PDF excerpt.*

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

### 1ginea2021001 - 11.      The authorities broadly agreed with the conclusions of the DSA. They underscored their

### Authorities' position and policy stance
- The authorities "broadly agreed with the conclusions of the DSA."
- Commitments emphasized:
  - Maintaining a sustainable level of debt that does not exceed a moderate risk of debt distress.
  - Maximizing concessional borrowing where possible, while noting concessional financing "is not available in the scale needed to finance their large infrastructure needs."
  - Continuing to strengthen debt management and enhance public investment management.

### External Debt Sustainability — Baseline Scenario (selected indicators, Percent of GDP unless otherwise indicated)
- External debt (nominal), selected years:
  - 2018: 19.4
  - 2019: 19.9
  - 2020: 25.8
  - 2021: 28.6
  - 2026: 33.0
  - 2031: 30.8
  - 2041: 16.9
- Identified net debt-creating flows (selected):
  - 2018: 1.3
  - 2019: -0.4
  - 2020: 3.2
  - 2021: -0.1
  - 2026: -1.5
  - 2031: -1.3
- Non-interest current account deficit (selected):
  - 2018: 19.5
  - 2019: 10.8
  - 2020: 13.7
  - 2021: 8.5
  - 2026: 7.8
  - 2031: 7.8
- Net FDI (negative = inflow), selected:
  - 2018: -15.9
  - 2019: -9.0
  - 2020: -8.3
  - 2026: -8.1
  - 2031: -7.5
- Endogenous debt dynamics (contribution), selected:
  - 2018: -2.2
  - 2019: -2.2
  - 2020: -2.3
  - 2021: -0.5
  - 2026: -1.2
  - 2031: -1.6
- Residual (selected):
  - 2018: -1.3
  - 2019: 0.9
  - 2020: 2.8
  - 2021: 2.9
  - 2026: 1.9
  - 2031: 0.4
- Sustainability indicators (selected):
  - PV of PPG external debt-to-GDP ratio (selected projection series): 18.4; 20.1; 21.5; 22.0; 22.2; 22.5; 22.9; 22.6; 18.6
  - PV of PPG external debt-to-exports ratio (selected): 31.5; 37.1; 47.7; 49.6; 49.8; 51.2; 51.9; 51.3; 42.3
  - PPG debt service-to-exports ratio (selected): 1.8; 1.5; 1.2; 2.0; 2.8; 3.3; 3.3; 3.3; 3.4; 3.5; 3.7
  - PPG debt service-to-revenue ratio (selected): 4.7; 3.2; 6.0; 8.3; 8.9; 9.9; 9.6; 9.4; 9.5; 9.9; 10.0
  - Gross external financing need (Billion of U.S. dollars), selected: 0.5; 0.3; 0.9; 0.2; 0.3; 0.2; 0.2; 0.3; 0.3; 0.6; 1.1

### Public Sector Debt Sustainability — Baseline Scenario (selected indicators, Percent of GDP unless otherwise indicated)
- Public sector debt (total), selected years:
  - 2018: 38.6
  - 2019: 38.0
  - 2020: 43.4
  - 2021: 43.3
  - 2026: 41.9
  - 2031: 38.1
  - 2041: 23.7
- Of which: external debt (selected): mirrors external DSA: 2018: 19.4; 2021: 28.6; 2026: 33.0; 2031: 30.8; 2041: 16.9
- Change in public sector debt (selected): -2.3; -0.6; 5.4; -0.2; -0.4; -0.4; -0.2; 0.0; -0.3; -0.8; -2.6
- Identified debt-creating flows (selected): -3.7; -4.3; -2.3; -2.1; -1.0; -0.5; -0.2; -0.1; -0.2; -0.8; -1.3
- Primary deficit (selected): 0.3; 0.0; 2.2; 1.3; 1.9; 1.9; 1.8; 1.9; 1.8; 1.3; 0.6
- Revenue and grants (selected, in percent of GDP): 14.7; 14.2; 12.8; 14.7; 14.7; 15.2; 15.6; 15.7; 15.6; 15.7; 16.0
- Primary (noninterest) expenditure (selected): 15.0; 14.2; 15.0; 16.1; 16.6; 17.0; 17.4; 17.6; 17.5; 17.0; 16.6
- Automatic debt dynamics (contribution, selected): -4.0; -4.3; -4.2; -3.3; -2.8; -2.3; -2.1; -2.0; -2.1; -2.1; -1.9
- Residual (selected): 1.5; 3.7; 7.7; 1.4; 0.8; 0.1; 0.1; 0.1; -0.1; 0.0; -1.3
- Sustainability indicators (selected):
  - PV of public debt-to-GDP ratio (selected series): 36.8; 35.5; 34.3; 33.6; 33.0; 32.7; 32.4; 30.5; 25.9
  - PV of public debt-to-revenue and grants ratio (selected): 286.9; 240.9; 233.9; 221.4; 211.1; 208.4; 207.1; 194.5; 161.5
  - Debt service-to-revenue and grants ratio (selected): 5.8; 9.6; 25.0; 28.5; 29.0; 30.8; 30.7; 30.5; 31.2; 32.4; 45.2
  - Gross financing need (selected): 0.3; 0.9; 5.4; 5.3; 6.0; 6.5; 6.6; 6.6; 6.6; 6.2; 7.9

### Key macroeconomic and fiscal assumptions (selected)
- Real GDP growth (in percent), selected series:
  - 2018: 6.4
  - 2019: 5.6
  - 2020: 7.1
  - 2021: 5.2
  - 2022: 6.1
  - 2023: 5.9
  - 2024: 5.5
  - 2025: 5.3
  - 2026: 5.3
  - 2031: 5.0
  - Average (Historical/Projections): 6.3; 5.3
- GDP deflator in US dollar terms (change in percent), selected: 8.0; 7.9; 6.3; 2.9; 1.9; 0.9; 1.6; 1.8; 1.9; 2.0; 2.0; 2.5; 1.9
- Effective interest rate (percent), selected: 1.8; 0.9; 0.9; 3.2; 1.4; 1.6; 1.6; 1.5; 1.2; -0.4; -5.1; 1.1; 1.1
- Growth of exports of G&S (US dollar terms, in percent), selected: -1.0; 1.2; 117.8; 0.2; -9.7; 4.9; 7.5; 6.0; 7.3; 7.1; 7.1; 24.2; 4.7
- Growth of imports of G&S (US dollar terms, in percent), selected: 24.6; -17.5; 97.7; -10.6; -13.6; 6.1; 8.3; 2.7; 3.5; 6.5; 6.6; 25.1; 2.7
- Grant element of new public sector borrowing (in percent), selected projection entries: 35.6; 35.1; 38.0; 40.8; 38.6; 36.6; 36.6; 33.3; ...; 37.3
- Government revenues (excluding grants, in percent of GDP), selected: 13.5; 13.9; 11.8; 13.2; 14.1; 14.7; 15.2; 15.3; 15.6; 15.7; 16.0; 13.7; 15.1

### Stress tests, scenarios, and sensitivity analysis (high-level)
- Stress tests and tailored scenarios are presented for 2021–31, including:
  - Historical scenario, commodity price shock, natural disasters (where applicable), market financing, combined contingent liabilities, and country-specific alternatives (Weak policy and Higher non-concessional borrowing).
- Country-specific alternative scenarios:
  - Weak policy: Assumes real GDP growth is 1 percentage point below the baseline over 2021-40, and the fiscal balance is 0.5 percent of GDP looser in 2021-23.
  - Higher non-concessional loans: Assumes additional non-concessional borrowing of US$350 million disbursed during 2021-23 on top of baseline non-concessional envelope.
- Selected stress-test outcomes (indicative breaches highlighted in source tables):
  - PV of debt-to-GDP, PV of debt-to-exports, debt service-to-exports, and debt service-to-revenue ratios are tested under alternative scenarios; several stress permutations produce higher ratios compared with baseline and may approach or breach thresholds in specified years (see sensitivity tables for year-by-year detail).
- Sensitivity analysis tables cover:
  - Alternative scenarios A1–A3, Bound Tests B1–B6, Tailored Tests C1–C4 across indicators such as Debt service-to-exports ratio, Debt service-to-revenue ratio, PV of debt-to-exports ratio, and PV of debt-to-GDP ratio for 2021–31.

### Analysis highlights and implications
- Baseline projections show external and public debt ratios rising into the mid-2020s before stabilizing and declining toward 2031 and 2041 in some series (e.g., external debt nominal peaking around mid-2020s and PV of PPG external debt-to-GDP remaining in the low-20s percent range across several projection years).
- Debt service pressures (debt service-to-revenue and debt service-to-exports) rise in projection years relative to recent history, underlining near-term financing vulnerabilities and the importance of concessional financing and debt management.
- The authorities' emphasis on maximizing concessional borrowing is consistent with the projection that the grant-equivalent share of external financing is material in the near-term projections (grant-equivalent financing as percent of external financing in selected projection years: 49.5; 41.1; 44.6; 47.0; 44.9; 36.6; 36.6; 33.3; ...; 40.9).

### Policy recommendations and priorities (drawn from authorities' commitments and DSA implications)
- Continue to prioritize concessional financing where available to limit the pace of non-concessional, higher-cost borrowing.
- Strengthen debt management to monitor vulnerabilities arising from rising debt service ratios and to optimize borrowing terms (tenor, grace periods, and grant element).
- Enhance public investment management to ensure that large infrastructure needs financed through borrowing generate growth and fiscal returns that support debt sustainability.
- Monitor and manage contingent liabilities and implement measures to limit fiscal risks from potential shocks (e.g., commodity price shocks, weaker growth, and higher non-concessional borrowing scenarios).

*Sources: Country authorities; and staff estimates and projections.*

### Introduction

### Introduction

### Overview
- Guinean authorities value continued engagement with the Fund and broadly share the thrust of staff reports on the 2021 Article IV consultation.
- The Covid-19 pandemic exacerbated macroeconomic and development challenges; authorities adopted the National Emergency Preparedness and Response Plan and implemented accommodative fiscal and monetary policies alongside financial sector and exchange rate measures.
- Near-term priorities include rolling out an effective vaccination program, targeting support to the most affected, and addressing a localized Ebola outbreak to a lesser extent.

### Recent Economic Developments and Outlook
- Real GDP growth is estimated at 7.1 percent in 2020.
- Sectoral growth in 2020:
  - Mining sector: 34.6 percent.
  - Non-mining sector: 1.3 percent.
- Fiscal outcome in 2020:
  - Deficit: 2.9 percent of GDP.
- Inflation:
  - End-of-period y-o-y inflation rose to two digits due to higher food prices, freight costs, and accommodative policies.
- External sector:
  - Current account deficit widened to 13.7 percent of GDP in 2020.
  - Deficit mainly financed by FDI with stronger investment in the mining sector.
- Outlook:
  - Growth expected to reach 5.2 percent in 2021 and hover above 5 percent over the medium-term.
  - Authorities expect recent investments (mining, energy, large infrastructure projects including Simandou iron ore project) to enhance competitiveness and boost private sector activity.
  - Downside risks: protracted Covid-19 pandemic (various strains, second and third waves in West Africa) and potential weakening demand for mining exports.

### Immediate Priorities
- Public health and social protection:
  - Covid-19 vaccine acquisition and distribution.
  - Targeted support to most vulnerable households and businesses.
  - Revamping of social welfare and transfers system by Agence Nationale d'Inclusion Economique et Sociale (ANIES) with World Bank and World Food Program assistance.
- Fiscal stance for 2021:
  - A more expansionary revised 2021 budget will be adopted.
  - Basic fiscal deficit set at - 0.1 percent of GDP compared to 0.5 per cent of GDP at the time of the 5th and 6th reviews last December.
  - Government committed to seeking grants and concessional resources to finance 2021 pandemic-related needs.
- Authorities will monitor developments and may introduce additional targeted business support if necessary.

### Medium-term Macroeconomic Policies and Structural Reforms
- Policy priorities as pandemic recedes:
  - Preserve fiscal sustainability.
  - Safeguard financial stability.
  - Bolster structural reforms for economic transformation and diversification.
- Build on gains from the 2017-2020 Extended Credit Facility-supported program.
- Focus areas:
  - Higher revenue mobilization (mainly from mining sector).
  - Efficient spending.
  - Increased investment in infrastructure and human capital, including social protection.
  - Far-reaching reforms to enhance business climate and promote diversification.

### Fiscal Policy
- Revenue mobilization measures:
  - Signed performance contracts with fiscal administration managers to significantly raise revenue by 2023.
  - Key measures: (i) digitalization of tax management, (ii) synchronization of tax and customs databases, (iii) operationalization of organizational structure at Direction Nationale des Impôts (DNI), (iv) adoption of updated Tax Code – Code Général des Impôts (CGI).
  - Planned thorough tax audits of mining, telecom, and banking sectors with African Development Bank (AfDB) support.
- Mining revenue mobilization:
  - Concern about growing gap between increasing mining output and revenue collected.
  - Authorities welcome Selected Issues Paper on Mobilizing Mining Revenue in Guinea and will consider recommendations.
  - Commit to applying the Mining Code “as it is” and ensuring transfer pricing reflects competitive prices.
  - Working with IMF and other TA partners to build capacity; forthcoming study on artisanal gold producers and intermediaries to inform potential reintroduction of a tax on artisanal gold.
- Spending priorities and management:
  - Bulk of spending to scale up investment in health, education, and social protection; pursue infrastructure investment and improve Public Investment Management (PIM).
  - Finalization and adoption of PIM Manual to improve public investment and productivity.
  - Strengthen Public Financial Management (PFM) via reinforcement of expenditure chain and cash management through future expanded Treasury Single Account (TSA).
- Energy sector reforms:
  - Advance 2020-2025 multi-year tariff reform to reduce untargeted electricity subsidies when conditions allow.
  - Implement automatic petroleum price adjustment mechanism while protecting most vulnerable.

### Debt Sustainability
- Priority to preserve debt sustainability amid ambitious public investment agenda.
- Commitment to preserve moderate risk of debt distress status as assessed by DSA.
- Policy stance: prudent borrowing strategy, reinforce debt management capacity alongside PIM to ensure medium-term debt sustainability, while mobilizing resources for infrastructure to support diversification.

### Monetary and Exchange Rate Policies
- Central Bank (Banque Centrale de la République de Guinée (BCRG)) stance:
  - Continue with a slightly accommodative monetary policy to support recovery.
  - Commit to limiting monetary financing of the budget to reduce inflation; measures since end-2020 to reduce central bank advances will continue.
  - Improve monetary policy framework and strengthen monetary policy transmission via active liquidity management to transition to an interest rate-based targeting framework.
  - Address high unremunerated reserve requirement to increase commercial banks’ ability to lend and promote financial intermediation.
- Institutional improvements:
  - Operationalization of the Monetary Policy Committee and use of Titres de Régulation Monétaire (TRMs) expected to enhance framework and achieve policy targets.
  - Actions to boost international reserves and reduce inflation to improve real exchange rate and competitiveness of the non-mining economy.

### Financial Sector Stability
- BCRG monitoring of pandemic effects on banking sector and readiness to withdraw Covid-19 support measures as pandemic recedes.
- Consideration of restoring prudential requirements; banks’ actions on NPLs and moratoria expected to enhance stability.
- Progress since 2019 Financial Sector Stability Review:
  - Enhanced risk-based supervision and financial intermediation with operationalization of risk-based supervision framework in 2019.
  - Launch in May 2021 of National Strategy for Financial Inclusion (NSFI) with World Bank support to improve access to finance for SMEs, youth, and women, including mobile money development.
  - A new AML/CFT law promulgated in April 2021 with IMF TA support; authorities will implement related regulations and ensure greater operational independence of the financial intelligence unit.

### Structural Reforms for Economic Diversification
- Authorities concur with staff on policies to leverage booming mining sector to promote diversification.
- Upcoming second national development plan (Plan National de Développement Economique et Social (PNDS II)) to focus on:
  - Diversifying economic activities away from mining.
  - Increasing digitalization and efficiency gains for private-sector led growth.
  - Promoting good governance.
- Diversification strategy pillars:
  - Create and leverage synergies between mining sector and rest of economy.
  - Move up value chain in sectors such as agriculture to promote agribusiness.
  - Exploration of large-scale alumina production by mining companies to exploit value chain.
- Enabling private sector environment:
  - Progress: operationalization of commercial court, improved public-private dialogue, fast-track business registration.
  - Ongoing: inception of credit bureau and digital portal for foreign trade.
  - Continue reforms to improve health and education systems and address bottlenecks in land registration, transport, and electricity infrastructure.
- Governance and anti-corruption:
  - Steps to enhance transparency and digitalize procedures; compliance with Rapid Credit Facility (RCF) governance safeguards for Covid-19 spending.
  - Commitment to adopt and implement national anti-corruption strategy and asset declaration regime swiftly.

### Social Outcomes and Poverty Reduction
- Commitment to improving social outcomes and reducing poverty sustainably.
- Overhaul of social welfare and transfers system has improved data collection on most vulnerable for better targeting.
- Implementation of poverty reduction programs under the new national development plan; emphasis on education, health, and inclusive growth to improve social outcomes and reduce poverty.

### Conclusion
- Authorities have advanced macroeconomic stability and structural reforms under the previous ECF-supported program.
- While working to exit Covid-19 and Ebola crises, they aim to safeguard macroeconomic stability and support the nascent recovery.
- Ongoing efforts to diversify the economy for strong, inclusive, private sector-led growth to improve social outcomes and reduce poverty.
- Authorities seek continued assistance from the Fund to advance their development agenda.

*Source: Introduction (1ginea2021001).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1ginea2021001.pdf_