Press Release No. 22/192

IMF Staff Concludes Visit to Guinea

June 9, 2022

• Economic activity is expected to remain resilient in 2022, driven by mining production. The recovery in the non-mining sector is expected to be more gradual, impacted by higher inflation triggered by the war in Ukraine and domestic uncertainties.
• The exchange rate appreciation and the government’s repayment of central bank advances are expected to partially offset additional inflationary pressures.
• Mitigating the impact of the food and fuel price shock to the most vulnerable through targeted, temporary measures is a key priority.

Washington, DC:

An International Monetary Fund (IMF) staff team, led by Ms. Clara Mira, held a hybrid Staff Visit from June 1-7, 2022, to discuss recent economic developments and the outlook. At the conclusion of the visit, Ms. Mira made the following statement:

“The Guinean economy remains resilient in the context of a difficult environment. The mining sector continues to show resilience, with booming gold and bauxite production. While reinforced by the easing of Covid-related disruptions and the partial repayment of government domestic arrears, growth in the non-mining sector is expected to be slower than originally projected, affected by the deterioration of the external environment triggered by the war in Ukraine and the uncertainty related to the domestic political situation.

“Average prices increased by 11 percent y-o-y in April, reflecting the impact of both preexisting pressures and the war in Ukraine. The appreciation of the Guinean franc, the government’s repayment of central bank advances earlier in the year, and the non-reliance on central bank financing are rightly contributing to offset some of the pressures from rising international commodity prices.

“To mitigate the effects of higher food prices on the most vulnerable the government signed a memorandum of understanding with the chamber of commerce establishing a reduction of customs duties for key necessities such as rice and sugar as well as price ceilings.

“Pump prices of petroleum products were increased by 20 percent on June 1 ^st, 2022. This increase lowered staff’s projected estimate of lost revenue from subsidizing fuel prices to around 2.3 percent of GDP. Less than 2 percent of this subsidy will directly benefit the poorest 20 percent of the population.

“Mitigating the impact of price increases with well-targeted support measures focused on the most vulnerable—including for example cash transfers, or school feeding programs—remains a key policy priority, particularly in a context of rising food insecurity.

“Revenue collection has been broadly positive in the first few months of the year (excluding fuel-related revenue owing to higher subsidization), which seems to point to improvements in compliance and digitalization efforts in the non-mining sector. On the expenditure side, the authorities have rationalized current expenditure and focused on implementing the domestically financed capital budget. The authorities have also started repaying part of the domestic arrears accumulated in 2021. Nonetheless, electricity subsidies remain high. In April 2022, the authorities issued their first ever five-year maturity bonds (Obligation du Trésor, OdT). The bonds will help extend the maturity profile of government debt, which should reduce near-term rollover risk and contribute to the deepening of domestic financial markets.

“Staff and the authorities held discussions on the need to strengthen domestic revenue mobilization, particularly in the mining sector; continue the repayment of arrears and avoid accumulating new ones; and mitigate the impact of the food and fuel price shock on the most vulnerable through well-targeted and temporary measures. On the monetary policy front, discussions included the need to continue limiting central bank financing of the budget, and to actively manage liquidity if domestic price pressures intensify.

“The authorities’ reiterated their commitment to use the proceeds from the SDR allocation prudently and transparently by investing in productive infrastructure and social sectors.

“The IMF mission team met with the President of the Transition HEM Mamadi Doumbouya, Minister Secretary General of the Presidency Amara Camara, Central Bank Governor Karamo Kaba, Secretary General of the Ministry of Economy Finance and Planning Abdoulaye Touré, Secretary General of the Ministry of Budget Gando Barry, the Secretaries General of the Ministries of Agriculture, of Infrastructure and of Mines, the management of the Agence Nationale de l’Inclusion Economique et Sociale (ANIES), the Société Guinéenne du Patrimoine Minier (SOGUIPAMI) and other senior government officials, in addition to representatives from the private sector, civil society and the development partner community.

“The IMF mission team wishes to express its gratitude to the Guinean authorities for their hospitality as well as constructive and fruitful discussions during the visit.”