IMF Executive Board Approves US$71 Million in Emergency Financing Support and Concludes 2024 Article IV Consultation with Guinea
IMF News, May 7, 2024
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- Published: May 7, 2024
Emergency financing and purpose
- The Executive Board approved a disbursement of SDR 53.55 million (about US$71 million) to Guinea under the Exogenous Shocks Window of the Rapid Credit Facility to help address immediate balance-of-payments needs associated with the explosion of the main fuel depot in late 2023.
- Emergency spending measures to be reflected in the revised budget law for 2024 include:
- transfers to affected households;
- decontamination of the explosion site;
- construction of housing, school, and health infrastructure;
- rehabilitation of damaged public buildings;
- start of construction work on a modern and safe fuel depot.
Economic outlook and projections
- Growth projections:
- Real GDP Growth (annual percentage change): 2024 projection 4.1 percent; 2025 projection 5.6 percent.
- Mining (annual percentage change): 2024 projection 7.6; 2025 projection 10.7.
- Industrial mining (annual percentage change): 2024 projection 9.8; 2025 projection 11.5.
- Non-mining (annual percentage change): 2024 projection 3.1; 2025 projection 4.2.
- Inflation:
- Inflation Average (annual percentage change): 2024 projection 11.0; 2025 projection 10.2.
- External sector and reserves:
- Current account balance (including official transfers): 2024 projection -10.6; 2025 projection -10.0 (percent of GDP).
- Overall balance of payments: 2023 Est. -0.6; 2024 Projection -0.4 (percent of GDP).
- Gross available reserves (months of imports)1: 2021 Act. 2.8; 2022 Prel. 2.5; 2023 Est. 2.2.
- Current account balance (excluding official transfers): 2023 Est. -10.7 (percent of GDP).
- Public finances:
- Total revenue and grants: 2024 projection 13.4; 2025 projection 13.2 (percent of GDP).
- Expenditures and net lending: 2024 projection 16.4; 2025 projection 15.8 (percent of GDP).
- Current Expenditures: 2024 projection 11.1.
- Capital Expenditures: 2024 projection 4.5; 2025 projection 5.2 (percent of GDP).
- Overall balance including grants: 2024 projection -3.0; 2025 projection -2.6 (percent of GDP).
- Basic fiscal balance: 2024 projection 0.1 (percent of GDP).
- Gross public debt: 2023 Est. 40.3; 2024 Projection 39.3; 2025 Projection 37.9 (percent of GDP).
- Nominal GDP (GNF billions): 2021 Act. 159,336; 2022 Prel. 170,313; 2023 Est. 195,789; 2024 Projection 226,143; 2025 Projection 262,951.
IMF assessment and policy recommendations
- Short-term policy stance:
- A temporary relaxation of the fiscal stance is warranted to respond to the explosion.
- Emergency financial assistance under the Rapid Credit Facility will address urgent needs including decontamination, assistance to households, and reconstruction.
- Medium-term fiscal and structural priorities:
- Mobilize domestic revenues, especially from the mining sector.
- Modernize tax administration.
- Improve public finance management and investment efficiency.
- Increase spending on education, health, and social protection, while anchoring spending on available resources.
- Reform the electricity sector to address shortages.
- Ensure that the Simandou iron ore project delivers expected benefits.
- Adapt to and mitigate climate change and address gender disparities.
- Strengthen governance and transparency, fight corruption, and improve the anti-money laundering and counter-terrorism financing regime (AML/CFT).
- Implement the 2023 safeguards assessment recommendations.
- Debt and financial stability guidance:
- Guinea remains at moderate risk of debt distress, with some space to absorb shocks; domestic debt vulnerabilities have increased due to government T-bonds issuance to finance high public investment spending.
- Preserve debt sustainability by maximizing concessionality of new debt, avoiding repeated accumulation of domestic arrears, strengthening debt management capacity, and enhancing public investment management.
- Monetary authorities should be ready to tighten monetary policy if needed and ensure central bank lending to the government remains within the statutory limit to help contain inflationary pressures.
- Implement the government securities market action plan to create alternative financing avenues and limit the increased sovereign-bank exposure.
- Strengthen financial sector regulation and supervision; discontinue the use of Treasury bond holdings as reserve requirements; respect statutory limits on central bank advances to the government.
Executive Board views and expectations
- Directors agreed that emergency assistance is critical and emphasized transparent use of the RCF disbursement.
- Directors supported temporary fiscal relaxation for emergency response, while stressing the need for domestic revenue mobilization to preserve medium-term debt sustainability.
- Directors welcomed authorities’ commitments to address transfer mispricing, reduce tax exemptions in the mining sector, and implement transparency and governance measures for RCF resources.
- Directors recommended reforms to fuel and electricity subsidies, stronger SOE management, and further efforts to strengthen AML/CFT and address climate vulnerabilities and gender gaps.
- It is expected that the next Article IV consultation with Guinea will be held on the standard 12-month cycle.
International Monetary Fund — Press Release No. 24/140, May 6, 2024