Frequently Asked Questions on Equatorial Guinea
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Context and recent shocks
- Equatorial Guinea was struck on March 7 by massive accidental explosions at a military compound in Bata, its largest city; the explosions killed over 100 people and caused widespread damage to surrounding neighborhoods.
- The country was already affected by a still unfolding COVID-19 pandemic, and the combination of the pandemic and the Bata explosions created a substantial financing gap by adversely impacting economic activity and weakening fiscal and external positions.
- The Extended Fund Facility-supported program (EFF) is off-track because governance reforms have taken longer than originally envisaged, and bringing the EFF back on track would take time as the authorities work on outstanding structural measures while addressing COVID-19 and the Bata fallout.
- Equatorial Guinea meets the IMF eligibility requirements for the Rapid Financing Instrument (RFI) because it has an urgent balance of payments need that, if not addressed, will result in an immediate and additional severe economic disruption.
- The August 2021 IMF Board of Governors approval of US$215 million SDR allocation for Equatorial Guinea did not eliminate the balance of payments gap.
IMF emergency assistance under the RFI
- On September 15, the IMF Executive Board approved Equatorial Guinea’s request for emergency assistance equivalent to about US$67.38 million under the RFI.
- Central objective of the RFI: provide resources to meet urgent funding needs arising from the Bata explosions and the growing scale and severity of the COVID-19 shock.
- RFI disbursement modality: direct budget support to
- cover the needs of the most vulnerable groups,
- compensate victims of the explosions,
- finance the pandemic response,
- boost higher spending in areas like health and food security.
- The RFI resources will cover only a fraction of such funding needs; additional external emergency support is required to cover the remaining needs.
- Authorities are seeking international community support and are committed to repatriating all available financial assets held abroad as soon as they become available.
- Bringing the EFF-supported program back on track would also help cover financing gaps, including by catalyzing donor support.
Governance, transparency, and anti-corruption measures
- Improving governance is an essential part of the IMF’s engagement with Equatorial Guinea; the authorities are taking steps to ensure financial assistance is used for intended purposes and emergency spending is appropriately accounted for.
- Authorities committed to a comprehensive set of governance and transparency measures under the RFI and implemented four prior actions, including:
- An anti-corruption law in line with international obligations and good practices was approved by Parliament and issued by the President.
- Independent international firms have been hired to audit all spending related to COVID and the Bata emergency; the authorities are committed to finishing the audits and publishing the results on the Ministry of Finance’s website by end-September 2021 and end-April 2022, respectively.
- Two escrow accounts were established at the Bank of Central African States (BEAC) for pandemic and Bata emergency-related spending—these accounts are to be replenished by the existing BEAC IMF account where the RFI purchase will be made, with drawings subject to the BEAC’s rules, including on transparency and anti-money laundering.
- Authorities committed to adhere to good practices in procuring and awarding contracts related to the Bata emergency and pandemic response and to publish beneficial ownership information of companies awarded contracts once beneficial ownership regulations have been adopted and published.
- Fund technical assistance is ongoing to support the authorities’ commitments.
Near-term economic outlook and key projections
- The widespread destruction in Bata and the onset of a third wave of the COVID-19 pandemic have weakened the near-term outlook.
- Real non-hydrocarbon GDP growth for 2021 is projected at 2.2 percent, implying that real output at end-2021 will remain below its 2019 level.
- The outlook assumptions include:
- Authorities secure sufficient financing to commence rebuilding, compensate victims, and continue responding adequately to the pandemic.
- Global and domestic conditions start to improve in the second half of 2021.
Policy priorities and recommendations
- Safeguard social spending and strengthen social protection to ensure sustainable and inclusive growth.
- Regularize government domestic arrears to support recovery of the non-hydrocarbon economy and strengthen the financial sector.
- Improve the business climate over the medium term, including through continued governance reforms, to enable economic diversification.
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