Press Release No. 08/68

Press Release No. 08/68

An International Monetary Fund (IMF) mission, led by Mr. Le Dem, visited the Republic of Guinea during March 20-April 2, 2008 to conduct discussions on the first review under the Poverty Reduction and Growth Facility (PRGF) arrangement, approved by the IMF Executive Board in December 2007. The mission met with Prime Minister Lansana Kouyaté, President of the National Assembly, Mr. Somparé, Minister of Finance, Economic Affairs and Planning Dr. Doré, Minister of Economic and Financial Control and Transparency Mr. Diallo, Minister of Mines and Geology Mr. Kanté, Minister of Commerce, Tourism and Industry Mr. Traoré, Governor of the Central Bank Mr. Bangoura, senior officials of the government and the central bank, and representatives of the business community, labor unions, civil society and external donors.

The mission issued the following statement in Conakry today:

"Following real GDP growth of about 1.8 percent in 2007, economic activity is expected to rebound substantially to around 4 ½ percent in 2008, underpinned by several large foreign-financed investment projects underway in the mining sector. Prudent fiscal and monetary policies implemented since the second quarter of 2007 have contributed to a rapid decline in inflation. The approval by the Paris Club creditors of a new debt restructuring agreement with Guinea in January 2008 provides for a generous treatment of external arrears and debt service over the next three years, but the country's external position remains fragile.

"Progress has been made in meeting the PRGF-supported program targets and in implementing structural reforms designed to bolster public finance management and to improve the financial operations and internal controls of the central bank. The mission urged the authorities to strengthen coordination between the Ministry of Finance and the Central Bank to improve program compliance, notably on avoiding external arrears and external financing on nonconcessional terms while building up international reserves.

"In discussing the fiscal position for 2008, the mission advised the authorities to take measures to boost the productivity of revenue collection agencies and expand the tax base. In this regard, the recent decision to re-establish pre-shipment inspection of imports is welcome.

"Higher-than-expected international energy and commodity prices present a challenge for macroeconomic management. The mission considers that the government's effort to align the retail prices of petroleum products with international prices is essential to maintain equilibrium in the public finances. In order to reduce the impact of such external shocks on the poor, the mission recommended that policy measures should be well focused and targeted to vulnerable groups, with due regard to fiscal sustainability.

"Discussions are expected to continue during the IMF/World Bank Spring meetings in Washington with a view to making further progress toward the completion of the review.

"The mission would like to thank the authorities for their hospitality and the fruitful discussions."