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© 2005 International Monetary Fund
May 2005
IMF Country Report No. 05/150
Republic of Equatorial Guinea: 2005 Article IV Consultation—Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for the Republic of Equatorial Guinea
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2004 Article IV consultation with the Republic of Equatorial Guinea, the following documents have been released and are included in this package:
the staff report for the 2005 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on April 25, 2005, with the officials of the Republic of Equatorial Guinea on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on March 31, 2005. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
a Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its April 25, 2005 discussion of the staff report that concluded the Article IV consultation.
a statement by the Executive Director for the Republic of Equatorial Guinea.
The documents listed below have been or will be separately released.
Report on the Observance of Standards and Codes—Fiscal Transparency Module
Statistical Appendix
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to publicationpolicy@imf.org.
Copies of this report are available to the public from
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INTERNATIONAL MONETARY FUND
EQUATORIAL GUINEA
Staff Report for the 2005 Article IV Consultation
Prepared by the Staff Representatives for the 2005 Consultation with Equatorial Guinea
Approved by Siddharth Tiwari and Martin Fetherston
May 3, 2005
The discussions for the Article IV consultation with Equatorial Guinea were held in Malabo during January 12-26, 2005. The mission included Messrs. Ames (head), Ellyne, Franken, Kovtun, Yao (all AFR), Mr. Maseda, and Mrs. López (both TGS). Messrs. Bah and Rutayisire of the Office of the Executive Director for Equatorial Guinea attended the discussions. Mr. Carstens, Deputy Managing Director, and Mr. Tiwari (AFR) also participated in the final meetings. The mission overlapped with an IMF fiscal transparency Report on Observance of Standards and Codes (ROSC) mission and a World Bank Petroleum Sector and Extractive Industries Transparency Initiative (EITI) mission.
The mission met with the President of the Republic; the Prime Minister; the Ministers of Finance, National Planning, Economy, and Mines; the National Director of the BEAC; and other senior government officials. It also met with representatives of the private sector, civil society, and the donor community.
At the conclusion of the last Article IV consultation on November 12, 2003, Executive Directors agreed that oil-related inflows posed considerable challenges to Equatorial Guinea’s macroeconomic management, including by raising public spending to unsustainable levels and exerting significant upward pressures on prices and the real exchange rate. They noted that these developments threatened non-oil activities and had potentially serious economic and social consequences. Directors underscored the urgency of developing a medium-term strategy to transform Equatorial Guinea’s oil wealth into sustained growth and development. They noted that this would require further improvements in governance and transparency, the development of a transparent framework to manage the county’s oil wealth, and structural reforms to bolster the non-oil sector.
As a member of the Bank of Central African States (BEAC), Equatorial Guinea has accepted the obligations under Article VIII of the Fund’s Articles of Agreement (Appendix I).
World Bank assistance has been limited mainly to economic sector work, including with regard to transparency in oil sector resource management (Appendix II).
Contents
Executive Summary
I. Introduction
II. Background
III. Recent Economic Developments
IV. Medium-Term Economic Outlook
V. Report on the Discussions
A. Poverty Reduction Strategy
B. Macroeconomic Policies
C. Medium-Term Outlook, Growth and Diversification Policies
D. Transparency
E. Statistics and Capacity Building
VI. Staff Appraisal
Boxes
1. CEMAC Convergence Criteria
2. Fiscal Transparency ROSC
3. Long-Run Fiscal Framework
Tables
1. Selected Economic and Financial Indicators, 2000-05
2. Central Government Financial Operations, 2000-05
3. Central Government Financial Operations, 2000-05 (In percent of GDP)
4. Monetary Survey, 2000-05
5. Balance of Payments, 2000-05
6. Medium-Term Selected Economic and Financial Indictors, 2003-10
7. Balance of Payments, 2003-10
Appendices
I. Relations with the Fund
II. Relations with the World Bank Group
III. Selected Social and Demographic Indicators, 1998-2002 and Country Profile: Millenium Development Goals, 1990-2002
IV. Statistical Issues
V. Table of Common Indicators Required for Surveillance
VI. Summary of Upstream and Downstream Hydrocarbon Production
Executive Summary
Hydrocarbon production will continue to be the engine of growth for the foreseeable future. Given that oil and gas are nonrenewable resources and have a limited impact on employment, the authorities need to develop the non-oil economy.
Equatorial Guinea should be able to make rapid progress toward achieving the Millennium Development Goals (MDGs). As yet, however, living standards of the majority of the population have not improved measurably.
The country has made important progress in increasing transparency and accountability in oil sector management and public finance. The authorities indicated their commitment to implement the recommendations of the fiscal transparency Report on Observance of Standards and Codes (ROSC) and to participate in the Extractive Industries Transparency Initiative (EITI).
The fiscal outcome for 2004 was marked by a stronger-than-expected revenue performance on account of higher oil prices and increases in hydrocarbon production. However, this was offset by overruns in capital expenditure, underscoring the need for better public expenditure management (PEM).
The liquidity overhang poses a risk to macroeconomic stability and financial sector soundness. In view of the insufficient instruments available to the regional central bank to mop up excess liquidity, the burden of adjustment falls on fiscal policy.
The country’s immediate challenge is to prepare a comprehensive development strategy that channels the country’s oil wealth into priority sectors while safeguarding macroeconomic stability. In formulating this strategy, the authorities will need to balance short-term social needs with longer-term intergenerational equity considerations.
Institutional capacity constraints continue to hinder the authorities’ ability to formulate and monitor macroeconomic policy. Priority should be placed therefore on building capacity in the areas identified by the fiscal transparency ROSC and World Bank EITI mission, as well as on the development of a poverty profile and the carrying out of a public expenditure review (PER).
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April 25, 2005
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Public Information Notice (PIN) No. 05/61
May 6, 2005
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