Statement by the IMF Staff Representative February 24, 2012
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This paper presents Guinea’s 2011 Article IV Consultation and requests for a three-year arrangement under the Extended Credit Facility. The macroeconomic improvement in 2011 has been mainly owed to sharp fiscal adjustment. The deficit on the budget’s basic balance has been reduced from 13 percent of GDP in 2010 to an estimated 2.5 percent of GDP, while monetary financing of the budget has been avoided in an effort to reduce excess liquidity stemming from large central bank advances in 2009–10. Key medium-term challenges are to reduce inflation while preparing the economy for an expected substantial increase in mining activity.

Abstract

This paper presents Guinea’s 2011 Article IV Consultation and requests for a three-year arrangement under the Extended Credit Facility. The macroeconomic improvement in 2011 has been mainly owed to sharp fiscal adjustment. The deficit on the budget’s basic balance has been reduced from 13 percent of GDP in 2010 to an estimated 2.5 percent of GDP, while monetary financing of the budget has been avoided in an effort to reduce excess liquidity stemming from large central bank advances in 2009–10. Key medium-term challenges are to reduce inflation while preparing the economy for an expected substantial increase in mining activity.

1. This statement provides information that has become available since the issuance of the staff report on February 13, 2012. The new information does not alter the thrust of the staff appraisal.

2. Updated preliminary information indicates that all quantitative indicative targets under the authorities’ staff-monitored program for end-December were met (Table 1). Compared to the estimates for the end-December outturn included in the staff report, lower fiscal revenue was more than offset by somewhat less current spending but especially by a shortfall in capital spending. The latter reflected delays in spending on a large contract in the electricity sector, which also contributed to higher net international reserves than estimated for the end of the year. Inflation declined to 18.5 percent year-on-year in January 2012.

Table 1.

Guinea: Indicative Targets for 2011 Under the SMP 1/

(Billions of Guinean francs unless otherwise indicated)

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Sources: Guinean authorities and IMF staff.

Definitions are included in the technical memorandum of understanding (TMU).

Flow over 2010 for fiscal criteria and stock for end-December 2010 for monetary and external debt criteria.

Cumulative change from end-December 2010.

Calculated using the program exchange rates.

End-2010 figure excludes 2009 SDR allocation.

External debt contracted or guaranteed other than with a grant element equivalent to 35 percent or more, calculated using a discount rate based on the OECD commercial interest rates. Excludes borrowing from the IMF.

3. The Guinean authorities have provided information confirming that they have observed the continuous structural reform measures under the 2011 staff-monitored program through end-December, 2011(Appendix I, Attachment I, Table 2 of the staff report). In addition, all prior actions for the program to be supported under the Extended Credit Facility have been completed.

4. On February 17, 2012, Paris Club creditors provided financing assurances for the medium-term economic program for which the Guinean authorities are requesting an arrangement under the Extended Credit Facility. Negotiations for a rescheduling of Guinea’s outstanding external debt to Paris Club creditors are expected to be held in April 2012.

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Guinea: 2011 Article IV Consultation and Requests for a Three-Year Arrangement Under the Extended Credit Facility, and for Additional Interim Assistance Under the Enhanced Initiative for Heavily Indebted Poor Countries—Staff Report; Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for Guinea.
Author:
International Monetary Fund