The Executive Board of the International Monetary Fund (IMF) today completed the fifth review of Guinea’s economic performance under the program supported by an Extended Credit Facility (ECF) arrangement. The Board’s decision enables the immediate disbursement of SDR 45.135 million (about US$63.6 million), bringing total disbursements under the arrangement to SDR 136.935 million (about US$192.9 million).
In completing the review, the Board also approved a request for an extension of the current ECF arrangement to end-December 2015 and an augmentation of access under the ECF arrangement by SDR 45.135 million (about US$ 63.6 million or 42.1 percent of quota) to help enhance international reserves, and cover the budget and urgent balance of payments needs resulting from the fight against the Ebola crisis.
The Executive Board approved the three-year ECF arrangement for Guinea on February 24, 2012, for SDR 128.52 million (see Press Release No. 12/57).
At the conclusion of the Executive Board’s discussion, Mr. Naoyuki Shinohara, Chair and Deputy Managing Director, issued the following statement:
“Guinea has been experiencing a major humanitarian and economic crisis caused by the Ebola epidemic, but the authorities have responded appropriately. Growth in 2014 is estimated to have slowed markedly; and inflation continued to decline, despite the modest exchange rate depreciation, while international reserves were maintained at a satisfactory level. In a challenging environment, fiscal policy has remained prudent, despite a sizeable revenue shortfall and additional spending needs to combat the Ebola epidemic. Against this backdrop, poverty, which is already widespread, is estimated to have increased.
“Despite these challenges, program performance under the Extended Credit Facility (ECF) arrangement was satisfactory. All end-June 2014 performance criteria and indicative targets, and most indicative targets for end-September were met. However, progress in structural reform has been slow, in large part because of Ebola-related constraints on capacity and delays in the delivery of technical assistance.
“Uncertainties about the impact and duration of the Ebola epidemic dampen the near-term macroeconomic outlook, and real GDP is projected to contract in 2015. The 2015 budget, which appropriates resources to combat Ebola and maintain a strong public investment effort, envisages an expansion in the fiscal deficit. The January 2015 agreement on increases in civil service wages is within the limits of the 2015 budget, but will reduce budgetary flexibility over the medium term. Nevertheless, it is important to ensure that recruitment in the social sectors is implemented as planned. Going forward, the authorities should press ahead with their civil service reform to ensure that the wage bill remains affordable and creates space for priority expenditure.
“The international community’s continued assistance, through the provision of highly concessional loans and grants and technical assistance, remains critical. The authorities’ commitments to ensure transparency in Ebola-related spending and complete their structural reform agenda under the program, to help underpin a revival in growth in the period ahead, are reassuring.
“The Central Bank’s intention to relax monetary policy to provide adequate liquidity to the private sector is appropriate given the downturn in growth. Inflation is also expected to remain in check and international reserve coverage to remain satisfactory.
“Growth and poverty reduction goals will be spurred by key reforms to strengthen the business climate, including in the mining and electricity sectors and through improved monitoring and supervision of the banking sector. Sustained efforts are also needed to strengthen the health sector and social safety nets.
“Executive Directors approved the completion of the fifth review and the disbursement of an amount equivalent to SDR 45.135 million under the ECF arrangement, including SDR 26.775 million as budget support to help meet part of the fiscal cost of the Ebola response, as well as the financing assurances review. They approved the authorities’ request for an extension of the current arrangement to end-2015, and augmentation in access.”