FIFITH REVIEW UNDER THE THREE-YEAR ARRANGEMENT UNDER THE EXTENDED CREDIT FACILITY, FINANCING ASSURANCES REVIEW, AND REQUESTS FOR AN AUGMENTATION OF ACCESS AND EXTENSION OF THE CURRENT ARRANGEMENT—STAFF REPORT; PRESS RELEASE; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR GUINEA
In the context of the Fifth Review Under the Three-Year Arrangement Under the Extended Credit Facility, Financing Assurances Review, and Requests for an Augmentation of Access and Extension of the Current Arrangement, the following documents have been released and are included in this package:
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on February 11, 2015, following discussions that ended on November 14, 2014, with the officials of Guinea on economic developments and policies underpinning the IMF arrangement under the Extended Credit Facility. Based on information available at the time of these discussions, the staff report was completed on January 28, 2015.
An Informational Annex prepared by the IMF.
A Debt Sustainability Analysis prepared by the staffs of the IMF and the World Bank.
A Press Release including a statement by the Chair of the Executive Board.
A Statement by the Executive Director for Guinea.
The following documents have been or will be separately released.
Letter of Intent sent to the IMF by the authorities of Guinea*
Memorandum of Economic and Financial Policies by the authorities of Guinea*
Technical Memorandum of Understanding*
*Also included in Staff Report
The publication policy for staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
FIFTH REVIEW UNDER THE THREE-YEAR ARRANGEMENT UNDER THE EXTENDED CREDIT FACILITY, FINANCING ASSURANCES REVIEW, AND REQUESTS FOR AN AUGMENTATION OF ACCESS AND EXTENSION OF THE CURRENT ARRANGEMENT
January 28, 2015
The Ebola outbreak has inflicted a heavy toll on Guinea’s economy notwithstanding the supportive macroeconomic policies the authorities put in place. Fiscal policy has expanded to reflect revenue shortfalls and higher Ebola-related spending, resulting in a markedly higher budget deficit. Monetary policy has also been supportive, as inflation continued to trend downwards and reserve coverage of imports has remained adequate.
Performance under the ECF program has been satisfactory. All quantitative performance criteria have been met. With the authorities focused on combating the Ebola outbreak, however, structural reform has advanced at a slower pace than previously envisaged, delaying the implementation of a number of structural benchmarks.
Macroeconomic policies in 2015 will remain supportive to help deal with the Ebola outbreak, which looks set to persist well into the year and induce a slight economic contraction. The 2015 budget foresees a widening of the deficit to provide space for Ebola-related spending, finance a significant salary increase for civil servants, and support the economy. Monetary policy will be relaxed to provide adequate liquidity to the private sector and facilitate bank financing of the government budget. A concerted international effort is needed to help the authorities fully implement their Ebola response plan. The 2015 structural reform agenda focuses on finalizing growth-friendly measures.
Risks are tilted to the downside. A prolonged presence of the Ebola epidemic could further disrupt economic activity. The renewal of political tensions and political uncertainty in the run-up to the presidential elections in 2015 could discourage investors and affect growth. However, Guinea would benefit from the recent decline in oil prices
Staff supports the completion of the 5th review under the ECF arrangement and financing assurances review and requests for: (i) an extension of the current arrangement to end-2015; (ii) an augmentation in access; and (iii) disbursement of 25 percent of quota as budget support under the 5th review. Completion of the review will result in disbursement of SDR 45.135 million (42.1 percent of quota).
Abebe Aemro Selassie and Masato Miyazaki
An IMF team consisting of Messrs. Snoek (head), Ms. Charry-Velasquez, Messrs. Bouis and Wane (all AFR), Dicks-Mireaux (SPR), Mooney (FIN), and Sulemane (resident representative) held discussions with the authorities in Paris, France during November 3–14, 2014. It met with the Minister of State and Economy and Finance Diaré and the Governor of the Central Bank of Guinea Nabé, and other senior officials.
RECENT DEVELOPMENTS AND PROGRAM IMPLEMENTATION
ECONOMIC OUTLOOK AND POLICY DISCUSSIONS FOR 2015
A. Economic Outlook and Risks
B. Fiscal Policy
C. Monetary and Exchange Rate Policies
D. Structural Reform
E. Poverty Reduction Strategy
PROGRAM MONITORING, FINANCING, AND RISKS
1. Recent Data on the Ebola Epidemic
2. First Annual Progress Report on PRSP Implementation
1. 2014 GDP Growth Projections
2. Economic Overview, 2013–15
3. Fiscal Sector Developments, 2013–14
1. Key Economic and Financial Indicators, 2013–17
2a. Fiscal Operations of the Central Government, 2013–17 (Billions of Guinean Francs)
2b. Fiscal Operations of the Central Government, 2013–17 (Percent of GDP)
2c. Fiscal Operations of the Central Government, 2013–15
3a Central Bank and Deposit Money Banks Accounts, 2013–15
3b. Monetary Survey, 2013–15
4. Balance of Payments, 2013–17
5. Performance Criteria and Indicative Targets, 2014–15
6. Banking Sector Key Economic and Financial Soundness Indicators, 2010–14
7. External Financing Requirements and Sources, 2013–15
8. Indicators of Capacity to Repay the IMF, 2014–25
9a. Original Schedule of Disbursements and Timing of Reviews Under the ECF Arrangement, 2012–15
9b. Proposed Schedule of Disbursements and Timing of Reviews Under the ECF Arrangement, 2012–15
10. Risk Assessment Matrix
I. Letter of Intent
Attachment I. Fifth Supplement to the Memorandum on Economic and Financial Policies
Attachment II. Technical Memorandum of Understanding
Front Matter Page
FIFTH REVIEW UNDER THE THREE-YEAR ARRANGEMENT UNDER THE EXTENDED CREDIT FACILITY, FINANCING ASSURANCES REVIEW, AND REQUESTS FOR AN AUGMENTATION OF ACCESS AND EXTENSION OF THE CURRENT ARRANGEMENT—INFORMATIONAL ANNEX
January 28, 2015
(In Consultation with Other Departments)
RELATIONS WITH THE FUND
JOINT WORLD BANK-FUND MATRIX
RELATIONS WITH THE AFRICAN DEVELOPMENT BANK, 2011–13
MILLENNIUM DEVELOPMENT GOALS
Front Matter Page
FIFTH REVIEW UNDER THE THREE-YEAR ARRANGEMENT UNDER THE EXTENDED CREDIT FACILITY, FINANCING ASSURANCES REVIEW, AND REQUESTS FOR AN AUGMENTATION OF ACCESS AND EXTENSION OF THE CURRENT ARRANGEMENT—DEBT SUSTAINABILITY ANALYSIS
January 28, 2015
Abebe Selassie and Peter Allum (IMF) and John Panzer (IDA)
Prepared by the International Monetary Fund and International Development Association
Guinea continues to face a moderate risk of debt distress.1Under the baseline scenario, all debt indicators are below their policy-dependent thresholds. However, stress tests point to vulnerabilities to macroeconomic shocks, in particular to negative shocks to growth, exports, FDI and fiscal performance. There is limited scope to take on additional debt over and above the projected amounts over the medium term. New borrowing in the next five years should be monitored closely and guided by prudent debt management. It would remain important to rely primarily on concessional sources of external financing; the planned strengthening of debt management would be important to ensure a sound forward-looking debt strategy. Compared to the last DSA, in the current DSA the Ebola epidemic is assumed to persist throughout most of 2015 resulting in the following differences: (i) a larger detrimental impact on the economy, (ii) a higher level of external borrowing in the short term to finance a larger budget deficit resulting from the Ebola outbreak and a higher level of public investment, (iii) an increase in access under the ECF arrangement of 42.1 percent of quota (SDR 45.135 million), and (iv) the one-off use of net bank financing in 2015 of about 2.0 percent of GDP. The current DSA also incorporates: (i) the budgetary impact of the 2015 civil service salary increase, (ii) the decline in the world oil prices—an increase in budgetary revenues and lower import bill, and (iii) the cancellation in 2012 of French claims under debt-for-development swaps (C2D).
Guinea: Fifth Review Under the Three-Year Arrangement Under the Extended Credit Facility, Financing Assurances Review, and Requests for an Augmentation of Access and Extension of the Current Arrangement