IMF Staff Completes 2021 Article IV Mission to Guinea

IMF News, April 30, 2021

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Growth is expected to reach 5.2 percent in 2021 driven by continued strength in the mining sector.
The Guinean economy grew by 7 percent in 2020, driven by a booming mining sector.
Non-mining growth remains subdued and is not expected to fully recover until 2022.
Non-mining activity accounts for over ¾ of total GDP and employs the vast majority of the population.
Guinea is facing a twin health shock: rising Covid-19 cases coupled with a recent new outbreak of Ebola (described as localized and under control).
Inflation has risen to above 12 percent, driven by rising food prices, freight rates, and the loosening of fiscal and monetary policies.
The current account deteriorated as imports of management, freight, and telecommunications services spiked, offsetting strength in the goods balance from strong mineral exports.
Reserves reached USD 1.3 bn at end-2020.

The 2020 fiscal outturns reflect the impact of the authorities’ Covid-19 Plan de Riposte; capital expenditure was under executed.
Public debt reached 44 percent of GDP at end-2020, including due to the frontloading of the first disbursement of the loan for the Souapiti dam.
The mission welcomes the authorities’ stated objective of increasing domestic revenues over the next two years, including by introducing performance contracts.
The mission recommended prompt adoption of the new Tax Code and noted encouragement from recent efforts to digitalize taxation.
Greater efforts will be needed to mobilize revenue from the mining sector, requiring application of the Mining Code to all new contracts and further work on transfer pricing issues.

The authorities are working on procuring Covid-19 vaccines, with assistance from development partners, including the COVAX initiative.
Development partners are expected to support Guinea’s efforts to vaccinate a significant share of its population in 2021, providing grants and concessional loans.
Immediate policy priorities include fast-tracking large-scale vaccinations, stepping up efforts to support vulnerable populations, and supporting the economic recovery.

The mission noted the need to continue reforms to improve the quality of expenditure by improving public investment management and public financial management.
Recommended reforms include phasing out electricity subsidies and gradually transitioning towards an automatic fuel price adjustment system; timing should be carefully assessed, and implementation prudently phased and well-communicated.
Savings from energy sector reforms could be used to strengthen the social safety net system.
Debt sustainability should be preserved by maintaining a prudent borrowing strategy.
The mission recommended greater efforts to achieve more inclusive and resilient growth by strengthening governance, investing in human capital, and continuing digitalization efforts to facilitate diversification.

The central bank took an appropriately accommodative stance during the pandemic.
As the pandemic subsides, the authorities are encouraged to take action to bring inflation back to single digits through active liquidity management.
The Treasury’s repayment of central bank advances would support the BCRG’s efforts to reduce inflation.
The mission commended the BCRG for its broadly consistent implementation of a rule-based FX intervention policy since November 2020, which has brought greater flexibility to the foreign exchange market.
Efforts to encourage digitalization and more inclusive access to financial services are beginning to bear fruit.

Commitments linked to the 2020 Rapid Credit Facility financing have been broadly implemented, with an audit on Covid-related procurement due in June.
The approval of the AML/CFT law was highlighted as a major accomplishment.
Notable successes on the business climate include the newly created commercial court and the one-stop shop for international trade.
Authorities are encouraged to continue reforms to the land registry and to strengthen the anti-corruption framework, including by swiftly adopting and implementing the national strategy and the asset declaration regime.

An IMF staff team, led by Ms. Clara Mira, held a virtual mission from April 14-28, 2021, to conduct the 2021 Article IV Consultation discussions with Guinea.
The mission met with Prime Minister Ibrahima Kassory Fofana, Minister of Economy and Finance Mamadi Camara, Central Bank Governor Lounceny Nabé, Minister of Budget Ismael Dioubaté, Minister of Plan and Economic Development Kanny Diallo, Minister of Mining Adboulaye Magassouba, Minister of Public Works Kadiatou Emelie Diaby, Minister in charge of Investments and Public-Private Partnership Gabriel Curtis, Minister of Hydrocarbons Diakaria Koulibaly, and other senior officials, and representatives from the private sector, civil society and the development partner community.
The mission will prepare a report of the Article IV consultation, which will be discussed by the IMF’s Executive Board in the next quarter.

IMF Communications Department — Press Release No. 21/118, April 30, 2021