IMF Executive Board Approves US$282.8 Million Three-Year Extended Fund Facility Arrangement for Equatorial Guinea

IMF News, December 18, 2019

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IMF Executive Board Approves US$282.8 Million Three-Year Extended Fund Facility Arrangement for Equatorial Guinea

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Bibliographic details

• Published: December 18, 2019

Program overview

• Approved on December 18, 2019: a three-year arrangement under the IMF’s Extended Fund Facility (EFF) for Equatorial Guinea in an amount equivalent to SDR205.009 million (about US$282.8 million, or 130 percent of Equatorial Guinea’s quota in the Fund).
• Program aims:
  • further reduce macroeconomic imbalances and address financial sector vulnerabilities;
  • improve social protection and human capital development;
  • promote economic diversification;
  • foster good governance, increase transparency and fight corruption;
  • catalyze additional external resources and contribute to rebuilding CEMAC regional reserves.

Executive Board decision and disbursement

• Immediate disbursement enabled: SDR29.287 million (about US$40.4 million).
• Remaining amount to be phased in over the program duration, subject to semi-annual reviews by the Executive Board.
• Board approval required three key prior actions focusing on governance and transparency:
  • submission of an Extractive Industries Transparency Initiative (EITI) membership application;
  • operationalization of a system to adequately track and control government expenditures;
  • publication of a governance diagnostic report and the authorities’ “good governance and anti-corruption action plan” developed in consultation with Fund staff.

Key messages from Tao Zhang (Deputy Managing Director and Acting Chair)

• Recent shocks and challenges:
  • sharp decline in oil prices and a secular decline in hydrocarbon output led to large macroeconomic imbalances and negative economic growth;
  • longstanding governance and corruption problems have affected the economy.
• Program priorities:
  • (i) preserve macroeconomic and financial stability;
  • (ii) improve governance and fight corruption;
  • (iii) support human capital development and improve social protection;
  • (iv) promote economic diversification.
• Implementation emphasis:
  • strict implementation of authorities’ commitments and adherence to a firm timetable is essential;
  • the Fund will conduct a fiscal safeguard review in early 2020.

Governance, transparency and anti-corruption measures

• Priority actions identified:
  • strengthen the anti-corruption framework by addressing conflict of interests and adopting and enforcing a robust asset declaration regime for senior public officials;
  • foster hydrocarbon sector transparency, including publication of all active oil and gas contracts, audits of GEPetrol and SONAGAS, reports on hydrocarbon sector data and information, and EITI membership;
  • further improve public financial management (PFM);
  • strengthen the rule of law and the AML/CFT framework.
• Additional measures:
  • enhance enforcement and international cooperation;
  • report suspicious activities related to politically exposed persons;
  • enhance the transparency of companies by making beneficial ownership information available.

Fiscal and structural measures

• Fiscal objectives:
  • sustained fiscal consolidation to address permanent decline in hydrocarbon revenue, maintain debt sustainability, and strengthen the external position;
  • reduce low-efficiency capital expenditures and increase non-hydrocarbon revenue;
  • shift expenditure composition away from capital outlays to create space for higher social spending.
• Tax and revenue measures:
  • adoption of a new excise tax law on imported beverages, tobacco and vehicles;
  • continued efforts to limit tax fraud and exemptions, strengthen large-taxpayer management, and improve customs enforcement.
• Structural reforms:
  • reforms to improve the business environment and promote economic diversification to support sustainable and inclusive growth.

Banking sector, arrears clearance, and financial stability

• Banking sector weaknesses:
  • high non-performing loans related to government arrears hindering recovery of the non-oil sector;
  • need to address undercapitalized banks.
• Arrears clearance strategy:
  • clearance of domestic arrears envisaged through government bond issuance once the ongoing arrears audit is concluded, with sizeable amortization during the arrangement period;
  • clearance of external arrears to official creditors by the first review under the EFF-arrangement.
• Banking-sector stabilization:
  • recapitalization of banks with capital shortfalls;
  • close cooperation with the Central African banking Commission (COBAC) to ensure all banks fully meet COBAC regulations, particularly prudential, governance, and AML/CFT requirements;
  • permanently reduce BEAC short-term liquidity support to banks to levels consistent with COBAC norms.

Risks and mitigation

• Downside risks to program implementation:
  • volatility in hydrocarbon prices;
  • PFM, governance and corruption vulnerabilities.
• Mitigating factors:
  • possibility of higher hydrocarbon output than envisaged in the program;
  • frontloading of key PFM, governance and anti-corruption measures;
  • authorities’ strong commitment to reforms.

Selected economic and financial indicators (2015–24) — key figures preserved exactly as presented

• Real GDP (annual percent change): 2015: -9.1; 2016: -8.8; 2017: -4.7; 2018: -5.7; 2019: -5.9; 2020 (Est.): -1.9; 2021 (Program): 1.0; 2022: -1.2; 2023: -1.4; 2024: [no number in source].
• Hydrocarbon sectors (annual percent change): 2015: -9.4; 2016: -8.2; 2017: -5.6; 2018: -9.7; 2019: -10.4; 2020: -5.0; 2021: -0.6; 2022: -11.3; 2023: -5.5; 2024: -6.4.
• Non-hydrocarbon sectors (annual percent change): 2015: -3.4; 2016: 0.0; 2017: 1.7; 2018: 2.9; 2019: 2.2; 2020: 2.8; 2021: 2.7.
• GDP deflator (annual percent change): 2015: -20.2; 2016: -6.3; 2017: 12.7; 2018: 13.1; 2019: -3.2; 2020: 0.4; 2021: 2.4.
• Consumer prices (annual average): 2015: 1.4; 2016: 0.7; 2017: 1.3; 2018: 0.9; 2019: 1.8; 2020: 1.9.
• Broad money (annual percent change): 2015: -10.9; 2016: -16.4; 2017: -0.8; 2018: 3.7; 2019: 4.9; 2020: 4.3; 2021: 5.0.
• Exports, f.o.b. (annual percent change): 2015: -46.1; 2016: -26.9; 2017: 10.5; 2018: 11.6; 2019: -19.2; 2020: -7.9; 2021: -6.1; 2022: -11.9; 2023: -4.6.
• Hydrocarbon exports (annual percent change): 2015: -47.5; 2016: -25.9; 2017: 9.6; 2018: 12.4; 2019: -18.9; 2020: -8.6; 2021: -6.8; 2022: -13.0; 2023: -6.0.
• Non-hydrocarbon exports (annual percent change): 2015: 34.6; 2016: -49.4; 2017: 39.6; 2018: -27.9; 2019: 14.9; 2020: 13.5; 2021: 11.9; 2022: 12.1.
• Imports, f.o.b. (annual percent change): 2015: -23.1; 2016: -33.9; 2017: -13.2; 2018: 9.5; 2019: -17.8; 2020: -3.3; 2021: -12.5; 2022: -1.7.
• Gross investment (percent of GDP): 2015: 24.7; 2016: 16.7; 2017: 12.6; 2018: 12.0; 2019: 12.2; 2020: 11.7; 2021: 12.3.
• Gross national savings (percent of GDP): 2015: 8.3; 2016: 6.8; 2017: 6.6; 2018: 6.5; 2019: 7.3; 2020: 7.9; 2021: 8.1; 2022: 8.6; 2023: 8.5.
• Of which: hydrocarbon revenue (percent of GDP): 2015: 22.2; 2016: 12.8; 2017: 13.8; 2018: 15.5; 2019: 14.3; 2020: 11.4; 2021: 10.1; 2022: 9.3.
• Non-hydrocarbon revenue (percent of GDP): 2015: 4.1; 2016: 3.5; 2017: 4.7; 2018: 6.1; 2019: 7.1.
• Overall fiscal balance (Commitment basis, percent of GDP): 2015: -15.1; 2016: -2.6; 2017: 2.3.
• Overall fiscal balance (Cash basis)2: 2015: -2.9; 2016: -4.9; 2017: -21.3.
• Non-hydrocarbon primary balance3 (percent of GDP): 2015: -37.0; 2016: -23.5; 2017: -16.1; 2018: -14.4; 2019: -12.4; 2020: -10.6; 2021: -8.1; 2022: -6.2.
• Outstanding public debt4 (percent of GDP): 2015: 33.6; 2016: 43.4; 2017: 38.0; 2018: 43.0; 2019: 46.2; 2020: 46.6; 2021: 45.3; 2022: 44.4; 2023: 41.4; 2024: 38.5.
• Change in domestic arrears (percent of GDP): 2015: 3.0; 2016: -2.3; 2017: -2.0; 2018: -22.4.
• Current account balance (including official transfers; - = deficit): 2015: -5.8; 2016: -3.8; 2017: -4.1; 2018: -3.9.
• Total external public debt (percent of GDP): 2015: 9.0; 2016: 11.2; 2017: 13.0; 2018: 14.8; 2019: 16.2; 2020: 15.6.
• Debt service-to-exports ratio (percent): 2015: 5.8; 2016: 3.3; 2017: 6.3; 2018: 6.7; 2019: 9.8.
• External debt service/government revenue (percent): 2015: 5.9; 2016: 6.9; 2017: 11.8; 2018: 15.4; 2019: 14.2.
• Reserve assets at the BEAC (months of next years' imports): 2015: 0.1; 2016: 4.5; 2017: n.a.
• CEMAC Foreign Reserves (US$ billions, end-of-period): 2015: 10.3; 2016: 12.5; 2017: 13.9.
• CEMAC reserves (in months of extra zone imports): 2015: 4.4; 2016: 4.2; 2017: 4.8; 2018: 5.3; 2019: 5.6.
• Oil price (U.S. dollars a barrel)5: 2015: 47.0; 2016: 39.0; 2017: 51.4; 2018: 67.2; 2019: 59.7; 2020: 56.7; 2021: 54.3; 2022: 53.7; 2023: 53.9; 2024: 54.5.
• Nominal GDP (billions of CFA francs): 2015: 7,795; 2016: 6,661; 2017: 7,152; 2018: 7,624; 2019: 6,950; 2020: 6,842; 2021: 6,875; 2022: 6,726; 2023: 6,806; 2024: 6,898.
• Nominal GDP (millions of US dollars): 2015: 13,180; 2016: 11,233; 2017: 12,287; 2018: 13,732; 2019: 11,864; 2020: 11,639; 2021: 11,824; 2022: 11,685; 2023: 11,933; 2024: 12,226.
• Non-hydrocarbon GDP (billions of CFA francs): 2015: 4,272; 2016: 3,996; 2017: 3,846; 2018: 3,910; 2019: 3,949; 2020: 4,096; 2021: 4,298; 2022: 4,481; 2023: 4,705; 2024: 4,942.
• Hydrocarbon volume (barrels): 2015: 133; 2016: 122; 2017: 115; 2018: 104; 2019: 92; 2020: 87; 2021: 89; 2022: 79; 2023: 74; 2024: 70.
• Oil volume (crude + condensado): 2015: 88; 2016: 75; 2017: 64; 2018: 57; 2019: 53; 2020: 50; 2021: 43; 2022: 37; 2023: 34; 2024: 31.
• Gas volume: 2015: 44; 2016: 47; 2017: 51; 2018: 46; 2019: 39; 2020: 41; 2021: 40.
• Exchange rate (average; CFA francs/U.S. dollar): 2015: 591.4; 2016: 593.0; 2017: 582.1; 2018: 555.2; 2019: 585.8; 2020: 587.8; 2021: 581.4; 2022: 575.6; 2023: 570.4; 2024: 564.2.

Press Release No. 19/472; IMF Communications Department; December 18, 2019.

References

• Tao Zhang
• https://www.imf.org/en/News/Articles/2019/12/13/na121319-equatorial-guinea-promoting-inclusive-growth-and-improving-governance-and-transparency
• Guinea and the IMF
• Republic of Equatorial Guinea and the IMF
• The IMF and Good Governance -- A Factsheet
• Press Releases
• PRESS CENTER
• Staff Monitored Program
• www.IMF.org/EquatorialGuinea
• https://www.imf.org/en/home