December 18, 2019
PRESS OFFICER: Lucie Mboto Fouda
Phone: +1 202 623-7100Email: MEDIA@IMF.org
On December 18, 2019, the Executive Board of the International Monetary Fund (IMF) approved 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). The arrangement is intended to support the authorities’ three-year economic program, which aims at further reducing macroeconomic imbalances and addressing financial sector vulnerabilities; improving social protection and human capital development; promoting economic diversification; and fostering good governance, increasing transparency and fighting corruption—all with the overarching aim of achieving sustainable and inclusive economic growth. Equatorial Guinea’s Fund-supported program will also serve as a mechanism to catalyze additional external resources as well as contribute to rebuilding the Economic and Monetary Community of Central Africa (CEMAC) regional reserves.
The IMF Executive Board’s decision enables an immediate disbursement of SDR29.287 million, about US$40.4 million. Disbursement of the remaining amount will be phased in over the duration of the program, subject to semi-annual reviews of the Fund-supported program by the Executive Board.
Following the Executive Board’s discussion on Equatorial Guinea, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, made the following statement:
"In recent years, the Equatoguinean economy has been impacted by a sharp decline in oil prices and a secular decline in hydrocarbon output, which led to large macroeconomic imbalances and negative economic growth. The economy has also been affected by longstanding governance and corruption problems. While the authorities have taken steps to address these challenges, a more comprehensive approach is needed to tackle them effectively and achieve sustainable and inclusive growth. Strict implementation of the authorities’ commitments and adherence to a firm timetable is essential.
"Against this background, the authorities’ program aims to: (i) preserve macroeconomic and financial stability; (ii) improve governance and fight corruption; (iii) support human capital development and improve social protection; and; (iv) promote economic diversification.
"Increasing transparency, improving governance and fighting corruption are critical to improve socio-economic outcomes. Priority should be given to: (i) strengthening the anti-corruption framework by addressing conflict of interests and adopting and enforcing a robust asset declaration regime for senior public officials; (ii) fostering hydrocarbon sector transparency, including the publication of all active oil and gas contracts, the audits of GEPetrol and SONAGAS and reports on hydrocarbon sector data and information as well as through EITI membership; (iii) further improving public financial management (PFM); and (iv) strengthening the rule of law and the AML/CFT framework. In support of the program, the Fund will also conduct a fiscal safeguard review in early 2020. Strict and full implementation of these measures is essential.
"Sustained fiscal consolidation is necessary to address the permanent decline in hydrocarbon revenue, maintain debt sustainability, and strengthen the external position. This requires further reducing low-efficiency capital expenditures, increasing non-hydrocarbon revenue and continued improvement in PFM. At the same time, the composition of expenditure needs to shift away from capital outlays to create space for higher social spending.
"Clearance of government domestic arrears will help reduce high non-performing loans and strengthen the banking system, boosting private confidence and allowing banks to support the recovery of the non-hydrocarbon sector. Early action is needed to address the issue of undercapitalized banks.
"Reforms to improve the business environment and promote economic diversification are also critical to support sustainable and inclusive economic growth."
Annex
Recent Economic Developments
The Equatoguinean economy has been severely impacted by a sharp reduction in international oil prices and a secular decline in hydrocarbon output. Macroeconomic imbalances have narrowed in the last few years, supported by fiscal consolidation, including under a 2018 Staff-Monitored program (SMP), but the economic situation and outlook remain difficult. The economy is still contracting, driven by a continued strong decline in hydrocarbon output. Imputed net foreign assets (NFAs) at the Bank of Central African States (BEAC) turned positive in mid-2019 but remain low. The banking sector remains weak—with high non-performing loans related to government arrears—hindering the recovery of the non-oil sector.
Program Summary
Equatorial Guinea’s EFF-supported program aims to further reduce macroeconomic imbalances to preserve macroeconomic stability; improve social protection and support human capital development; address financial sector vulnerabilities; promote economic diversification; and foster good governance and transparency and fight corruption.
Board approval of the program required three key prior actions focusing on governance and transparency. These included the submission of an Extractive Industries Transparency Initiative (EITI) membership application, the operationalization of a system to adequately track and control government expenditures, and the publication of a governance diagnostic report and of the authorities’ “good governance and anti-corruption action plan” developed in consultation with Fund staff.
A key component of the program is the implementation of the governance and anti-corruption plan. The plan builds on the measures launched under the Staff Monitored Program and is informed by the governance diagnostic report prepared by Fund staff, which identified key governance weaknesses in Equatorial Guinea. The program also contains measures to strengthen the anti-corruption framework by dealing with conflict of interests, the implementation of a robust asset declaration regime for senior public officials, and enhancing enforcement and international cooperation; promote hydrocarbon sector transparency, including through the Extractive Industries Transparency Initiative (EITI) membership, conduct and publication of audits of the state-owned hydrocarbon companies, and publication of periodic data reports on the sector; improve the rule of law; upgrade the anti-money laundering framework and leverage it in the fight against corruption, including by reporting suspicious activities related to politically exposed persons and enhancing the transparency of companies by making the beneficial ownership information available.
The program also aims to support regional stabilization efforts, bolster investor confidence and catalyze resources from multilateral institutions and donors.
On the fiscal side, the program seeks to reduce low-efficiency expenditures and increase non-hydrocarbon revenues to reduce the non-hydrocarbon primary deficit and set public debt on a downward trend. To achieve these objectives, the authorities have adopted a new excise tax law on imported beverages, tobacco and vehicles. Among other measures, they also plan to continue their efforts to limit tax fraud and exemptions, strengthen large-taxpayer management, and improve customs enforcement. Additionally, they plan to continue rationalizing capital expenditure, including to allow for higher spending in the social sectors and human capital formation to support more inclusive economic growth, poverty reduction, and improved social outcomes in health and education.
The clearance of domestic arrears would allow to sharply reduce non-performing loans, improve bank liquidity and strengthen the banking sector, which is key to restart non-hydrocarbon growth. The program envisages the clearance of arrears through government bond issuance once the ongoing arrears audit is concluded, with sizeable amortization of these obligations during the arrangement period. The program also envisages clearance of external arrears to official creditors by the first review under the EFF-arrangement.
In addition to the positive impact of domestic arrears clearance, banking sector stability will be fostered by the recapitalization of banks with capital shortfalls. The authorities will also work closely with the Central African banking Commission (COBAC) to ensure that all banks fully meet COBAC regulations, particularly prudential, governance, and Anti Money Laundering/Financial Crime Protection (AML/CFT) requirements. This includes permanently reducing BEAC short-term liquidity support to banks to levels consistent with COBAC norms.
Finally, structural reforms are expected to play a crucial role in supporting fiscal consolidation and improving growth prospects. The program comprises reforms to the business environment and other reforms to promote economic diversification and support the achievement of sustainable economic growth.
Program implementation remains subject to some downside risks, including volatility in hydrocarbon prices, and Public Financial Management (PFM), governance and corruption vulnerabilities. However, these risks are mitigated by the possibility of higher hydrocarbon output than envisaged in the program, and by the frontloading of key PFM, governance and anti-corruption measures, along with the authorities’ strong commitment to reforms.
Background
Equatorial Guinea, which became a member of the IMF on December 22, 1969, has an IMF quota of SDR158 million.
For additional information on the IMF and the Republic of Equatorial Guinea, see
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Equatorial Guinea: Selected Economic and Financial Indicators, 2015–24 |
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|
Est. |
Program |
Projections |
|||||||||||
|
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
2024 |
||||
|
(Annual percentage change, unless otherwise specified) |
|||||||||||||
|
Production, prices, and money |
|||||||||||||
|
Real GDP |
-9.1 |
-8.8 |
-4.7 |
-5.7 |
-5.9 |
-1.9 |
1.0 |
-4.7 |
-1.2 |
-1.4 |
|||
|
Hydrocarbon sectors1 |
-9.4 |
-8.2 |
-5.6 |
-9.7 |
-10.4 |
-5.0 |
-0.6 |
-11.3 |
-5.5 |
-6.4 |
|||
|
Non-hydrocarbon sectors |
-8.8 |
-9.7 |
-3.4 |
0.0 |
0.0 |
1.7 |
2.9 |
2.2 |
2.8 |
2.7 |
|||
|
GDP deflator |
-20.2 |
-6.3 |
12.7 |
13.1 |
-3.2 |
0.4 |
-0.6 |
2.7 |
2.4 |
2.8 |
|||
|
Hydrocarbon sectors |
-36.5 |
-17.6 |
31.4 |
24.5 |
-9.8 |
-3.6 |
-5.5 |
-1.8 |
-0.9 |
-0.6 |
|||
|
Non-hydrocarbon sectors |
1.1 |
3.6 |
-0.4 |
1.6 |
1.0 |
2.0 |
2.0 |
2.1 |
2.2 |
2.2 |
|||
|
Consumer prices (annual average) |
1.7 |
1.4 |
0.7 |
1.3 |
0.9 |
1.7 |
1.7 |
1.8 |
1.9 |
1.9 |
|||
|
Consumer prices (end of period) |
1.6 |
2.0 |
-0.2 |
2.6 |
1.6 |
1.7 |
1.7 |
1.8 |
1.9 |
2.0 |
|||
|
Monetary and exchange rate |
|||||||||||||
|
Broad money |
-10.9 |
-16.4 |
1.0 |
-0.8 |
1.0 |
3.7 |
4.9 |
4.3 |
5.0 |
5.0 |
|||
|
Nominal effective exchange rate (- = depreciation) |
-6.9 |
2.7 |
2.2 |
… |
… |
… |
… |
… |
… |
… |
|||
|
Real effective exchange rate (- = depreciation) |
-6.4 |
2.4 |
0.6 |
… |
… |
… |
… |
… |
… |
… |
|||
|
External sector |
|||||||||||||
|
Exports, f.o.b. |
-46.1 |
-26.9 |
10.5 |
11.6 |
-19.2 |
-7.9 |
-6.1 |
-11.9 |
-4.6 |
-4.7 |
|||
|
Hydrocarbon exports |
-47.5 |
-25.9 |
9.6 |
12.4 |
-18.9 |
-8.6 |
-6.8 |
-13.0 |
-5.7 |
-6.0 |
|||
|
Non-hydrocarbon exports |
34.6 |
-49.4 |
39.6 |
-8.6 |
-27.9 |
14.9 |
13.5 |
11.9 |
12.1 |
12.7 |
|||
|
Imports, f.o.b. |
-23.1 |
-33.9 |
-13.2 |
9.5 |
-17.8 |
-3.3 |
-17.6 |
-12.5 |
-6.0 |
-1.7 |
|||
|
Terms of trade |
-34.7 |
-5.4 |
35.0 |
40.7 |
-15.2 |
-4.7 |
-5.5 |
-1.3 |
-0.7 |
0.5 |
|||
|
Government finance |
|||||||||||||
|
Revenue |
-20.2 |
-45.4 |
10.0 |
16.8 |
-14.3 |
-3.4 |
0.2 |
-3.2 |
1.0 |
1.2 |
|||
|
Expenditure |
-4.6 |
-42.8 |
-23.3 |
-1.0 |
-18.4 |
-2.2 |
-3.1 |
-7.1 |
2.0 |
0.8 |
|||
|
(Percent of GDP, unless otherwise specified) |
|||||||||||||
|
Investment and savings |
|||||||||||||
|
Gross investment |
24.7 |
16.7 |
12.6 |
12.0 |
12.2 |
13.1 |
11.7 |
12.2 |
12.3 |
12.4 |
|||
|
Gross national savings |
8.3 |
3.7 |
6.8 |
6.6 |
6.5 |
7.3 |
7.9 |
8.1 |
8.6 |
8.5 |
|||
|
Government finance |
|||||||||||||
|
Revenue |
26.5 |
16.9 |
17.3 |
19.0 |
17.8 |
17.5 |
17.5 |
17.3 |
17.3 |
17.2 |
|||
|
Of which : hydrocarbon revenue |
22.2 |
12.8 |
13.8 |
15.5 |
14.3 |
12.8 |
11.4 |
10.1 |
9.3 |
8.6 |
|||
|
non-hydrocarbon revenue |
4.3 |
4.1 |
3.5 |
3.5 |
3.5 |
4.7 |
6.1 |
7.1 |
7.9 |
8.6 |
|||
|
Expenditure |
41.6 |
27.8 |
19.9 |
18.5 |
16.5 |
16.4 |
15.8 |
15.0 |
15.2 |
15.1 |
|||
|
Overall fiscal balance (Commitment basis) |
-15.1 |
-10.9 |
-2.6 |
0.5 |
1.3 |
1.1 |
1.6 |
2.3 |
2.1 |
2.2 |
|||
|
Overall fiscal balance (Cash basis)2 |
-2.9 |
-7.9 |
-4.9 |
1.2 |
-0.6 |
-21.3 |
1.6 |
2.3 |
2.1 |
2.2 |
|||
|
Non-hydrocarbon primary balance3 |
-37.0 |
-23.5 |
-16.1 |
-14.4 |
-12.4 |
-10.6 |
-8.1 |
-6.2 |
-5.6 |
-4.9 |
|||
|
Outstanding public debt4 |
33.6 |
43.4 |
38.0 |
43.0 |
46.2 |
46.6 |
45.3 |
44.4 |
41.4 |
38.5 |
|||
|
Change in domestic arrears |
12.2 |
3.0 |
-2.3 |
0.7 |
-2.0 |
-22.4 |
0.0 |
0.0 |
0.0 |
0.0 |
|||
|
External sector |
|||||||||||||
|
Current account balance (including official transfers; - = deficit) |
-16.4 |
-13.0 |
-5.8 |
-5.4 |
-5.7 |
-5.7 |
-3.8 |
-4.1 |
-3.8 |
-3.9 |
|||
|
Total external public debt |
9.0 |
9.5 |
8.6 |
9.5 |
11.2 |
13.0 |
14.8 |
16.2 |
15.6 |
15.1 |
|||
|
Debt service-to-exports ratio (percent) |
3.6 |
5.8 |
3.3 |
3.3 |
4.3 |
6.3 |
6.7 |
9.6 |
9.8 |
10.1 |
|||
|
External debt service/government revenue (%) |
5.9 |
12.8 |
7.3 |
6.9 |
8.6 |
11.8 |
11.8 |
15.4 |
14.8 |
14.2 |
|||
|
Memorandum items |
|||||||||||||
|
Reserve assets at the BEAC (months of next years' imports) |
3.6 |
0.2 |
0.1 |
0.2 |
0.6 |
2.6 |
4.5 |
6.1 |
6.8 |
n.a. |
|||
|
CEMAC Foreign Reserves |
|||||||||||||
|
(US$ billions, end-of-period) |
10.3 |
5.0 |
5.8 |
6.6 |
8.3 |
10.5 |
12.5 |
13.9 |
15.2 |
n.a. |
|||
|
(in months of extra zone imports) |
4.4 |
2.3 |
2.3 |
2.7 |
3.3 |
4.2 |
4.8 |
5.3 |
5.6 |
n.a. |
|||
|
Oil price (U.S. dollars a barrel)5 |
47.0 |
39.0 |
51.4 |
67.2 |
59.7 |
56.7 |
54.3 |
53.7 |
53.9 |
54.5 |
|||
|
Nominal GDP (billions of CFA francs) |
7,795 |
6,661 |
7,152 |
7,624 |
6,950 |
6,842 |
6,875 |
6,726 |
6,806 |
6,898 |
|||
|
Nominal GDP (millions of US dollars) |
13,180 |
11,233 |
12,287 |
13,732 |
11,864 |
11,639 |
11,824 |
11,685 |
11,933 |
12,226 |
|||
|
Non-hydrocarbon GDP (billions of CFA francs) |
4,272 |
3,996 |
3,846 |
3,910 |
3,949 |
4,096 |
4,298 |
4,481 |
4,705 |
4,942 |
|||
|
Hydrocarbon volume (barrels) |
133 |
122 |
115 |
104 |
92 |
87 |
89 |
79 |
74 |
70 |
|||
|
Oil volume (crude + condensado) |
88 |
75 |
64 |
57 |
53 |
50 |
43 |
37 |
34 |
31 |
|||
|
Gas volume |
44 |
47 |
51 |
46 |
39 |
37 |
46 |
41 |
40 |
39 |
|||
|
Exchange rate (average; CFA francs/U.S. dollar) |
591.4 |
593.0 |
582.1 |
555.2 |
585.8 |
587.8 |
581.4 |
575.6 |
570.4 |
564.2 |
|||
|
Sources: Data provided by the Equatoguinean authorities; and staff estimates and projections. |
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|
1 Including oil, LNG, LPG, butane, propane, and methanol. |
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|
2 Includes a one-time clearance of outstanding arrears through securitization in 2020. |
|||||||||||||
|
3 Excluding oil revenues, oil-related expenditures, and interest earned and paid. |
|||||||||||||
|
4 Outstanding public debt includes domestic arrears. |
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|
5 The local price of crude oil is the Brent and includes a quality discount. |
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