May 6, 2024
PRESS OFFICER: Tatiana Mossot
Phone: +1 202 623-7100Email: MEDIA@IMF.org
Washington, DC: The Executive Board of the International Monetary Fund (IMF) approved today a disbursement of SDR 53.55 million (about US$71 million) under the Exogenous Shocks Window of the Rapid Credit Facility to help Guinea address urgent balance-of-payment needs associated with the fuel depot explosion.
The emergency spending, which will be reflected in the revised budget law for 2024, includes transfers to affected households; the decontamination of the explosion site; the construction of housing, school, and health infrastructure; the rehabilitation of damaged public buildings; and the start of construction work on a modern and safe fuel depot.
Guinea’s growth is expected to decelerate to 4.1 percent in 2024 amid fuel shortages and rebound to 5.6 percent in 2025, sustained by a resilient mining sector. Policies for 2024 aim at mitigating the impacts of the fuel explosion while minimizing deviations from medium-term growth and economic development objectives. In the medium term, mobilizing domestic revenues, especially from the mining sector, modernizing tax administration, improving public finance management and investment efficiency, as well as increasing spending on education, health, and social protection, while anchoring spending on available resources, will help boost productivity and reduce poverty.
The Executive Board also concluded the 2024 Article IV consultation[1] with Guinea.
Following the Executive Board’s discussion, Ms. Gita Gopinath, First Deputy Managing Director, and acting Chair, issued the following statement:
“Emergency financial assistance under the Rapid Credit Facility will help address urgent balance-of-payments needs associated with the explosion of a major fuel import and storage facility in late 2023. Urgent needs include those related to the decontamination of the site, assistance to affected households, and reconstruction of buildings, infrastructure, and a new fuel depot.
“A temporary relaxation of the fiscal stance is warranted to respond to the explosion. Over the medium term, mobilizing domestic revenue, especially from the mining sector, and improving public finance management would create space for increasing spending on education, health, and social protection, helping to boost productivity, reduce poverty and preserve debt sustainability. Reforming the electricity sector to address shortages remains key.
“Guinea remains at moderate risk of debt distress, with some space to absorb shocks. However, domestic debt vulnerabilities have increased, reflecting government T-bonds issuance to finance high public investment spending. Prudent macroeconomic policies, including maximizing the concessionality of new debt, avoiding the repeated accumulation of domestic arrears, strengthening debt management capacity, and enhancing public investment management, remain key to preserving medium-term debt sustainability.
“The monetary authorities’ readiness to tighten monetary policy, if needed, and to ensure that central bank lending to the government remains within the statutory limit will help contain inflationary pressures. The steadfast implementation of the government securities market action plan, designed with Fund assistance, would help create alternative avenues to finance the government and limit the sovereign-bank exposure, which has increased significantly.
“The implementation of structural reforms will help manage Guinea’s vulnerability to domestic and external shocks and achieve sustained and inclusive growth. In this context, there is need to ensure that the Simandou iron ore project delivers the expected benefits for the Guinean economy, as well as to adapt to and mitigate climate change, address gender disparities, and to strengthen governance and transparency by fighting corruption and improving the anti-money laundering and counter-terrorism financing regime (AML/CFT). The implementation of the 2023 safeguards assessment recommendations will also be critical.”
Executive Board Assessment[2]
Executive Directors agreed with the thrust of the staff appraisal. They acknowledged that Guinea is facing major challenges as the explosion of a major fuel import and storage facility in late 2023 led to fuel shortages, inflationary pressures, and urgent financing needs. Directors noted that emergency financial assistance will be critical to address the urgent needs associated with the explosion, mainly linked to assistance to affected households, cleaning and reconstruction. Ensuring that the RCF disbursement is used in a transparent manner remains paramount. Directors looked forward to additional progress toward a UCT-quality program to address Guinea’s structural vulnerabilities and help catalyze additional international support. They also looked forward to the transition to civilian rule.
Directors agreed that a temporary relaxation of the fiscal stance is warranted to respond to the explosion. They stressed the need for domestic revenue mobilization to create fiscal space for priority spending while preserving debt sustainability over the medium term. Directors welcomed in this regard the authorities’ commitment to address transfer mispricing and reduce tax exemptions in the mining sector. They also highlighted the need to ensure that the Simandou project delivers the expected benefits for the Guinean economy.
Directors encouraged the authorities to improve the quality of public expenditure by strengthening human capital and social spending and public investment management. They stressed the need to reform fuel and electricity subsidies and strengthen the management of SOEs. Directors noted that, while the risk of debt distress remains moderate, vulnerabilities have increased. Against this background, they recommended maximizing the concessionality of new debt, avoiding the repeated accumulation of domestic arrears, and strengthening debt management capacity.
Directors welcomed the authorities’ readiness to tighten monetary policy if needed to contain inflationary pressures. They stressed the need to respect the statutory limit on advances to the government, avoiding ad hoc adjustments unless in extraordinary circumstances, and also called for discontinuing the use of Treasury bond holdings as reserve requirements. Directors encouraged the authorities to implement the recommendations of the safeguards assessment and strengthen financial sector regulation and supervision to mitigate risks to financial stability, including from the sovereign-bank nexus.
Directors underscored the importance of structural reforms to foster inclusive growth. They stressed the need to strengthen governance and combat corruption and welcomed in this regard the authorities’ commitment to implement transparency and governance measures for the use of resources under the RCF. Additional efforts will also be needed to strengthen the AML/CFT framework and to 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.
Guinea: Key Economic and Financial Indicators, 2021–25
(Percent of GDP, unless otherwise indicated)
|
|
2021 |
2022 |
2023 |
2024 |
2025 |
|
|
Act. |
Prel. |
Est. |
Projection |
|
|
|
|
|
|
|
|
|
Output and Inflation |
|
|
|
|
|
|
Real GDP Growth (annual percentage change) |
5.6 |
4.0 |
5.7 |
4.1 |
5.6 |
|
Mining (annual percentage change) |
2.9 |
6.8 |
9.4 |
7.6 |
10.7 |
|
Industrial mining (annual percentage change) |
9.2 |
15.4 |
18.1 |
9.8 |
11.5 |
|
Non-mining (annual percentage change) |
6.3 |
3.3 |
4.8 |
3.1 |
4.2 |
|
Inflation Average (annual percentage change) |
12.6 |
10.5 |
7.8 |
11.0 |
10.2 |
|
|
|
|
|
|
|
|
Central government finances |
|
|
|
|
|
|
Total revenue and grants |
13.5 |
13.7 |
13.9 |
13.4 |
13.2 |
|
Expenditures and net lending |
15.2 |
14.5 |
15.5 |
16.4 |
15.8 |
|
Current Expenditures |
12.8 |
11.0 |
10.9 |
11.1 |
10.5 |
|
Capital Expenditures |
2.3 |
3.4 |
4.5 |
5.2 |
5.2 |
|
Overall balance including grants |
-1.7 |
-0.8 |
-1.6 |
-3.0 |
-2.6 |
|
Basic fiscal balance |
-0.7 |
0.5 |
0.3 |
-0.7 |
0.1 |
|
|
|
|
|
|
|
|
External sector |
|
|
|
|
|
|
Current account balance (including official transfers) |
-2.5 |
-8.6 |
-8.7 |
-10.6 |
-10.0 |
|
Current account balance (excluding official transfers) |
-2.5 |
-8.6 |
-8.7 |
-10.7 |
-10.0 |
|
Overall balance of payments |
2.4 |
2.1 |
-0.8 |
-0.6 |
-0.4 |
|
|
|
|
|
|
|
|
Gross available reserves (months of imports)1 |
2.8 |
3.4 |
2.5 |
2.2 |
2.2 |
|
Gross public debt |
42.4 |
40.1 |
40.3 |
39.3 |
37.9 |
|
Nominal GDP (GNF billions) |
159,336 |
170,313 |
195,789 |
226,143 |
262,951 |
|
|
|
|
|
|
|
|
Sources: Guinean authorities; and Fund staff estimates and projections. |
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|
|
|
|
|
1 Assuming the "residual financing gap" of the BOP is filled. And in months of following years’ imports, excluding artisanal gold related imports. Previous staff reports have reported a coverage ratio using imports net of capital goods. |
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[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summing up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .
