Abstract
The paper first discusses price trends and the relationship between money growth and inflation. Second, it focuses on the central challenge of improving competitiveness and promoting exports to enhance growth in the economy. Finally, it reviews the microfinance sector. The study also includes the following statistical data: economic and financial indicators, consumer price index, central government revenue and expenditure, monetary survey, structure of interest rates, balance of payments, composition of imports and merchandise exports, nominal and effective exchange rates, and external public debt.
I. Introduction
1. This selected issues paper and statistical appendix provide background information to the staff report on the 2003 Article IV consultation discussions with Guinea (SM/03/228, 7/2/03)
2. The staff report discusses the main challenges facing Guinea in the short- and medium-term. The immediate task is to arrest the surge in inflation and to restore macroeconomic stability by bringing the budget under control and tightening monetary policy. The main challenge for the medium-term is to enhance competitiveness so as to attract investments and create a viable private sector to foster growth prospects and reduce poverty.
3. The topics in this paper were selected to focus on some of these key challenges. The first chapter discusses price trends and the relationship between money growth and inflation in Guinea. The study shows both an immediate and long-run monetary pass-through in CPI inflation, indicating the need to contain reserve and broad money growth.
4. The second chapter focuses on the central challenge of improving competitiveness and promoting exports to enhance growth in the economy. It shows that Guinea’s export performance has been poor despite a depreciating real effective exchange rate and a relatively open trade regime, because of a lack of diversification policies and institutional and structural impediments to trade.
5. The third chapter reviews the microfinance sector in Guinea. It examines the development and growth of microfinance institutions and their impact on poverty reduction, and the appropriate regulatory and supervisory framework that must be put in place to ensure the proper functioning of these institutions.