Washington, DC: Management of the International Monetary Fund (IMF) approved a 12-month non-financing Staff Monitored Program (SMP) for Equatorial Guinea on June 24, 2024.
Hydrocarbon production in Equatorial Guinea has fallen 56 percent since its peak in 2008 and is expected to fall a further 32 percent by 2029. Driven by a contraction in hydrocarbon production, Equatorial Guinea re-entered recession in 2023, with real GDP estimated to have contracted by 5.8 percent. The persistent decline in hydrocarbon production has put Equatorial Guinea’s fiscal and external accounts under strain. The economy is expected to stagnate in the medium term, reinforcing the urgent need for economic diversification.
The objective of the SMP with Equatorial Guinea is to deliver stronger, sustainable, and more inclusive growth in the face of a contracting hydrocarbon sector. The key pillars of the SMP supporting this objective are ensuring fiscal sustainability, restoring the soundness of the banking sector, undertaking structural reforms to facilitate economic diversification, improving social outcomes, and promoting better governance.
To ensure fiscal sustainability, the authorities are targeting fiscal adjustment in 2024 and 2025 that is consistent with safeguarding public debt sustainability in the medium term. This adjustment is expected to be underpinned by phasing out fuel subsidies, rationalizing capital expenditure, and improving domestic revenue mobilization. Despite the adjustment, the authorities will prioritize social spending to improve social outcomes. They aim to increase current social spending, especially for healthcare and education.
To restore the soundness of the banking sector, the authorities are preparing a plan for clearing domestic arrears, including those to the banking sector, and will take steps to ensure the health of a systemic public bank. Structural reforms planned to facilitate economic diversification include improving the quality and cost of internet access.
The authorities have committed to a broad range of important reforms to promote better governance. They will approve implementing regulation for the anti-corruption commission, enabling the commission to begin carrying out its mandate, including overseeing the asset declaration regime. To foster transparency, the authorities will publish extractive sector contracts and expenditure audits. They will also prepare a national AML/CFT strategy to reinforce confidence in the financial system.
The SMP is designed to support the authorities’ implementation of their home-grown reform strategy. Its successful implementation will help Equatorial Guinea rebuild a track record of policy implementation as a steppingstone to a potential Fund-supported financing arrangement.
