Guinea: Selected Issues
Author: International Monetary Fund. African Dept.
Publication Date:
29 Jul 2016
eISBN:
9781475520958
Language:
English
Keywords:
ISCR; CR; Guinea; financial service; indirect tax; direct tax; firm; investment-growth nexus; investment program; infrastructure investment; multiyear investment framework; rate of return; Consumption taxes; Private investment; Infrastructure
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Guinea: Selected Issues

Abstract

Guinea: Selected Issues

Debt, Investment and Growth in Guinea

This paper presents the results of the application of the Debt, Investment and Growth model (Buffie et al., 2012) to the case of Guinea. The model application allows simulating the macroeconomic implications on growth, fiscal policy and debt sustainability of scaling-up of investment. A scenario analysis comparing the results under different investment paths is also presented. The results suggest that Guinea stands to benefit substantially from a scaling-up of public investment. Model-based estimates suggest that the GDP per capita benefits from the authorities PIP could stand in the vicinity of 2–4 percent. However, ensuring that the expected growth and poverty reduction gains are realized requires the implementation of an accompanying fiscal strategy to preserve macroeconomic stability.

A. Introduction

1. Guinea is contemplating a major public infrastructure program during the period 2016–21. The pillar of the Post-Ebola Recovery Plan (Table 1) of Guinea’s long-term development strategy (Vision Guinea 2035) is a massive scaling-up of public investment to foster high and inclusive growth. Guinea plans to undertake a significant Public Investment Plan that envisages sizable investments on the order of 13 percent of GDP per year during the 2017–21 period. The government has prioritized the electricity sector and discussions for the construction of the Souapiti hydropower dam (450-MW) are well advanced. Funding for this ambitious program, estimated to cost USD 1.567 billion (23% of GDP) is likely to be a combination of equity and the contraction of new non-concessional debt. The government envisions also the implementation of several programs with large investments in the agriculture sector, and the rehabilitation and expansion of roads. These additional projects have not been the subject of feasibility studies, but preliminary indications put the total cost at about 4 percent of GDP per year over the next five years.

Table 1.

Guinea: Cost and Funding of the Post-Ebola Priority Action Plan by Sector

(Millions of USD)

article image
Source: Guinean authorities.

2. The planned fiscal expansion could jeopardize macroeconomic stability despite the expected growth dividends. Recent analyses based on case studies show that public investment surges are weakly associated with long-term positive growth impacts, as these tend to be beset by poor project selection, and financed by borrowing that rarely finances itself (Warner, 2014). Buffie et al. (2012) show that positive results are contingent on the country’s structural conditions such as the authorities’ public investment management capacity, the rate of return to public investment, and the economy’s absorptive capacity. They also show how, even under optimistic assumptions on the rates of return, debt sustainability concerns can arise. One of the policy implications of these findings is the need for these strategies to be analytically supported by sound macroeconomic frameworks that adequately capture the nexus public investment and growth, illustrate the policy trade-offs, and the strategies to increase the likelihood of a successful implementation.

3. This paper applies to Guinea the model developed by Buffie et al. (2012) to analyze alternative public investment trajectories and their effects on growth, debt sustainability, and fiscal adjustment. The paper is organized as follows. Section B presents the elements of Guinea’s PIP. Section C presents the results of the simulation of three alternative investment paths. The exercise aims at illustrating the levels of fiscal effort required under alternative financing options. Section D closes with a discussion of the importance of implementing policies to increase public investment efficiency and productivity to increase the PIP’s growth dividends.

B. Public Investment in Guinea

4. Public infrastructure needs in Guinea are large and have been at the center of the government’s development strategy for the past five years. Addressing Guinea’s massive public infrastructure gaps was the pillar of the growth strategy to correct the impact of several decades of poor governance. Policies implemented until 2010, including by the military regime, led to economic stability, low growth, high inflation, a rapid loss of reserves, as well as dismal access to infrastructure and basic social services. With the election of President Alpha Conde in end-2010, Guinea engaged in an ECF- supported program to restore macroeconomic stability and growth. Against the backdrop of soaring commodity prices, the strategy aimed at extracting large revenue from new mining sector investments to finance the scaling up of public infrastructure and the diversification of the economy.

5. However, investment has been lower than expected. A 15 percent of GDP revenue windfall from the resolution of a long-standing dispute with Rio Tinto over the large Simandou iron-ore deposit allowed the public investment rate to increase from 5.7 percent of GDP in the 2000–11 period to 9.1 percent of GDP during 2012–15. However, limited fiscal space along with a series of shocks that buffeted the Guinean economy resulted in public investment rates lower than those anticipated, and large public infrastructure investment needs still prevail (Figure 1).1

Figure 1.
Figure 1.

Guinea: Public Investment in Guinea: Comparison Between the Projections of the Last Article IV (2012) and Outcomes

(Percent of GDP)

Citation: IMF Staff Country Reports 2016, 262; 10.5089/9781475520958.002.A001

Source: Guinean authorities.

6. The government’s strategy is focused on fostering economic growth, through large investment to unlock the country’s considerable potential, especially in the electricity and agricultural sectors. The construction of the Souapiti dam will allow Guinea to tap its massive hydropower potential of 6,000 MW, and become a major producer and net exporter of electricity to the neighboring Senegal, Gambia and Guinea-Bissau. It will also increase local electricity supply to businesses and households. In addition, the authorities are contemplating large investments in the sector of roads to connect people and markets, agriculture to reach food security, and to rehabilitate the health sector to prevent epidemics like Ebola. The authorities expect the new investment projects to boost growth both during the construction and operation phases.

7. The Souapiti hydroelectric dam is one of the authorities’ key projects. An Engineering, Procurement, and Construction2 contract has been signed in January 2016 between the Chinese company China International Water and Electric Corp. (CWE) and the Guinean Government to build the dam, which would be delivered in 2021. Under the terms of the contract, which amounts to 1.382 USD billions, 15 percent of the financing would be done by the Guinean Government in the form of equity and the remaining 85 percent would be financed through a commercial loan from EXIMBANK China.3 The equity component would be funded from a sale of the State’s stake in Kaleta (a 240-MW hydroelectric dam constructed by CWE in 2016), possibly to CWE.

8. Financing for the additional projects is also not yet secured. The main programs envisioned are to reach food security by doubling rice production mainly through the development of irrigation capabilities, rehabilitating the health infrastructure, and extending the roads network. In addition, this investment program will lead to higher current spending, including on wages, for maintenance and operations.

9. The size of the required investment could imply significant consequences for Guinea’s debt and fiscal sustainability. Static debt sustainability analyses typically fail to account for the investment-growth nexus, which could lead to underestimating the effects of investment on growth and overestimating the effects on debt sustainability. In light of the growth benefits expected to be derived from the implementation of the Souapiti project, staff prepared a scenario analysis using the Debt, Investment & Growth model (based on Buffie et al (2012)) to assess the impact of the PIP on Guinea’s debt vulnerabilities. The model captures the investment-growth link, and allows to identify the mix of debt and/or fiscal adjustment required to finance a given investment trajectory, given a path of grants and concessional debt. Key insights from the analysis indicate that for the strategy to contribute to unlock Guinea’s growth potential, the program needs to be accompanied, among other factors, by (i) gradual implementation; (ii) capacity building in macroeconomic management; (iii) improved revenue mobilization; (iv) advances in budgeting, governance and PFM processes; (v) progress in structural reforms that increase public investment efficiency and economic productivity; and (vi) limited recourse to non-concessional finance.

C. A Model-based Debt Sustainability Analysis: Main Features and Calibration

10. The model is a two-sector small open economy dynamic stochastic general equilibrium model. The supply-side of the economy is modeled with a traded and a non-traded sector, with both production functions including private and public capital. The government collects revenue from the consumption tax and user fees from infrastructure services, and spends on interest payments, transfers and infrastructure investments. The path of investments in public infrastructure, grants and public concessional debt are exogenously given, and derived from current macroeconomic forecasts. Transversality conditions (to identify a solution for the maximization problem) are met through a fiscal reaction function, with the consumption tax rate and transfers as instruments. The model can also be closed by allowing the path of commercial debt (domestic or external) to be endogenously determined (given values for the fiscal instruments).

11. The model captures features specific to low-income countries. First, the model takes into account the difficulties faced by low-income countries in making productive public investments. In particular, it accounts for the fact that public investments do not systematically translate into effective public capital (captured through an efficiency parameter s). Likewise, the impact of effective public capital on growth depends on its rate of return, which can vary across investment projects. In addition, countries that invest massively may also be facing absorptive capacity issues: large scale investments can lead to cost overruns because of coordination issues or supply bottlenecks. The model also captures some of the dynamics of credit-constrained economies by including optimizing and hand-to-mouth consumers and limited access to international markets. Finally, the model can simulate the effects of various shocks that may affect low-income countries such as terms of trade shocks, as well as shocks to risk premiums and total factor productivity.

12. The model’s parameters and key macroeconomic ratios are chosen to replicate as close as possible the main features of the Guinean economy (Table 2). Macroeconomic indicators (debt ratios, public infrastructure investment to GDP ratios) are reported for 2016 (first recovery year after the Ebola outbreak). We discuss below the rationale behind some of the key parameters in the calibration:

  • The ratio of non-savers to savers is fixed at 1.2, on the basis of the Financial Inclusion Database, which report that 45.2 percent of the population aged 15+ saved in the past year.

  • The values for the capital’s share in value added in the traded and non-traded sectors (αx and αy) are those of Buffie et al. (2012). These parameters were estimated from the matrices assembled by the Global Trade Analysis Project and the International Food Policy Research Institute. For Sub-Saharan African (SSA) countries, the GTAP database leads to a capital share of around 55–60 percent for the non-tradable sector, and 35–40 for the tradable sector.

  • The value of the rate of return on infrastructure (R) is set at 30 percent. Dalgaard and Hansen’s (2005) macro-based estimations suggest rate of returns between 15 and 30 percent. We opt for the upper limit of the estimates given Guinea’s low initial capital stock levels. It takes into account the direct and indirect effects that the Souapiti project will have on businesses’ production, profitability, and investment.

  • The efficiency of public investment (s) and the efficiency of public investment at the steady state (s_bar) are fixed at 30 percent. The concept of efficiency refers to the extent to which an increase in public investment translated into public capital (s bar is associated with the efficiency of steady-state public investment whereas s is associated to the efficiency of the investment surge). Pritchett (2000) estimates the efficiency of investment to be between 0.08 and 0.49 in Sub-Saharan countries. We opt for a value of 30 percent given Guinea’s fragile status.

  • The user fees for infrastructure services (µ) are calculated as a share of recurrent costs, set at 50 percent based on Briceno-Garmendia et al. (2008) estimates for SSA countries.

Table 2.

Guinea: Calibration Parameters

article image

D. Scenario Analysis

Unconstrained Tax Adjustment

13. Three alternative scenarios are simulated. A baseline scenario, under which the public investment rate is kept constant at current levels (9 percent of GDP) in the short –run and decreases over time, a first alternative scenario that incorporates the additional investments required for the construction of Souapiti (Alt-Souapiti) that takes the public investment rate to 15 percent during 2017–21, and a second alternative scenario that includes all the public investments foreseen under the Post-Ebola Recovery plan (public investment rate of 16 percent during the scaling-up period and permanently higher onwards), including the construction of Souapiti. In the three cases, the consumption tax rate is allowed to adjust to close any financing gaps arising from the implementation of the investment program (i.e. debt is exogenously determined). Across all three scenarios, the path of concessional debt and grants are assumed to be identical.

14. The expected growth dividends would be significant (Figure 3). Real GDP per capita would be higher by 1.5 to 2.5 percent in the next five years. Over the medium-term, the average GDP growth rate would be of 1.48 and 1.63 percent for the first and second alternative scenarios, against 1.40 for the baseline (Table 3). Furthermore, under the baseline scenario some “crowding-in” of public investment could be possible as the increased savings would allow an increase in the private investment rate.

Table 3.

Guinea: Growth and Private Investment Dividends from Different Investment and Financing Options

article image
Note: the growth dividend is measured as the average growth rate of the real GDP per capita from 2018 (investment peak) to 2036; the ‘consumption’ and ‘private investment’ columns measure the average growth rates in consumption and private investment over the same period.Source: Authors’ calculations

15. However, in the short to medium-term a large fiscal adjustment would be required to finance the increased investment. Given the paths for debt and grant financing, the consumption tax rate would have to increase from 20 percent in the baseline scenario to 28–30 percent in the alternative scenarios.4,5 This increase would be also accompanied by lower private consumption and investment (crowding out effects). Furthermore, such a large increase in the tax rate would prove much difficult to implement.

Debt Financing

16. The fiscal adjustment required would still be large under alternative financing structures. Figure 4 presents the results if the increase in the tax rate is capped at 25 percent (still a large adjustment) and the difference is funded with additional external commercial debt. In this set-up, the growth dividends would be larger (3–3.5 percent increase in per capita GDP under the alternative scenarios), as tapping external savings would prevent the fiscal expansion to crowd out the private sector. However, debt sustainability concerns might arise: just the implementation of Souapiti would be accompanied by an increase in the debt to GDP ratio to 60 percent of GDP in the short-run, increasing Guinea’s vulnerability to external shocks. Meanwhile, sustaining a permanently higher investment rate would risk placing the country in an unsustainable debt path (Figure 2). On the other hand, a funding strategy relying on domestic debt would still result in an increase in the debt vulnerabilities while lowering the growth dividends, as a result of the crowding-out effects (Figure 5).

Figure 2.
Figure 2.

Guinea: Total Public Debt Across Scenarios

Citation: IMF Staff Country Reports 2016, 262; 10.5089/9781475520958.002.A001

On the Role of Structural Factors

17. A third line of analysis illustrates the role that structural factors play in determining the success of public investment surges by analyzing the sensitivity of the simulations to changes in the investment efficiency parameter: an increase in the efficiency coefficient from 0.3 to 0.6 (equal to the average for a Sub-Saharan Low Income country) in the baseline scenario leads to higher output gains (GDP per capita growth would reach 3.2 in the short-run), higher private consumption and investment, and reduces the burden on tax adjustment (Figure 6 and Table 3). We then also increase the rates of return of investment, in this case from 30 percent to 50 percent (arguably a very optimistic assumption) as well as the user fees from 50 to 85%. Again, while the impact on GDP, private consumption and investment are positive, the fiscal adjustment remains significant, illustrating the challenges in project prioritization (choosing only those with the highest expected social return levels).

Guinea: Enhancing the Efficiency of Public Investment

Public investment supports the provision of social and economic infrastructure and can boost economic growth. As shown in the theoretical and empirical literature, the economic dividends depend on the efficiency of investments (Chakraborty and Dabla-Norris, 2009; Gupta et al. 2014). In particular, Warner (2014) shows that investment booms can have a limited impact of growth because of weak project appraisal, selection and management procedures. For countries at the lowest quartile in public investment efficiency, jumping to the highest quartile would double the impact of their investment on growth (IMF, 2015).

The efficiency of public investment depends on Public Investment Management Practices (PIM), which includes a large range of characteristics from three main categories. A good planning of investment levels is crucial to ensure the fiscal sustainability and establish priorities across projects. The proper allocation of spending requires transparent multi-year budgeting, clear and competitive project appraisal and selections. As a final step, the implementation of the investment project in a timely manner, with a transparent budget execution while avoiding cost overruns is also crucial. In addition, putting in place ex-post audit procedures increases incentives for sound appraisal, selection, and implementation stages.

Guinea would benefit from an improvement in all aspects of Public Investment Management. Guinea is facing difficulties in its medium-term budgeting and planning process. Therefore, improvements could be done in investment selection, prioritization of projects, and estimates of the feasibility and the projected expenditures for each project. Advances in these areas would prevent rent seeking behaviour and cost overruns.

Figure 3.
Figure 3.

Guinea: Unconstrained Tax Adjustment

Citation: IMF Staff Country Reports 2016, 262; 10.5089/9781475520958.002.A001

Source: Authors’ calculations.
Figure 4.
Figure 4.

Guinea: Tax Adjustment and External Commercial Debt

Citation: IMF Staff Country Reports 2016, 262; 10.5089/9781475520958.002.A001

Source: Authors’ calculations.
Figure 5.
Figure 5.

Guinea: Tax Adjustment and Domestic Debt

Citation: IMF Staff Country Reports 2016, 262; 10.5089/9781475520958.002.A001

Source: Authors’ calculations.
Figure 6.
Figure 6.

Guinea: First Alternative Scenario Under Different Financing Options

Citation: IMF Staff Country Reports 2016, 262; 10.5089/9781475520958.002.A001

Source: Authors’ calculations.
Figure 7.
Figure 7.

Guinea: The Importance of Structural Factors

Citation: IMF Staff Country Reports 2016, 262; 10.5089/9781475520958.002.A001

Source: Authors’ calculations.

E. The Elements of a Fiscal Adjustment Strategy

18. Results from the scenario analysis suggest the need to build fiscal space to free resources to finance investment. The key elements of a sensible fiscal strategy that ensures the projected scaling up of infrastructure investment does not compromise fiscal sustainability include: (i) effective revenue mobilization; (ii) advancing the fiscal reform agenda to better execute spending through the adoption of a Medium Term Budgeting Framework (MTBF) and further advances in Public Financial Management (PFM) reform; and (iii) continued reliance on concessional financing.

Pillar I. Policies to Improve Revenue Mobilization

19. Mobilizing domestic non-resource revenue could perhaps be the single most important public finance challenge in Guinea in the next decade. After some progress up to 2012, non-mining revenue regressed significantly in 2013 and has more or less remained constant at around 15 percent of GDP since then (Figure 8). This stands in sharp contrast with the performance of comparable countries. For example, in Senegal tax revenue was on average 6 percent of GDP higher than in Guinea during 2010–15, of which 30 percent for direct income taxes alone. Mali and Cameroon, which both started at lower levels than Guinea have now caught up.

Figure 8.
Figure 8.

Guinea: Non-resource Revenue (Excluding Grants)

(Percent of GDP)

Citation: IMF Staff Country Reports 2016, 262; 10.5089/9781475520958.002.A001

Source: IMF Staff calculations.

20. A tax revenue assessment6 shows that Guinea’s tax potential could reach 3–5 percent of GDP. Tightening the control of the commercial tax base will be a crucial element to tapping this potential. Available information suggests that over ¾ of commercial imports crossing the border (and on which duties are paid) do not show up in turnovers declared to the Tax Department, pointing to a large under-declaration of sales and likely distribution through informal and/or undeclared channels. Advances in taxpayer identification, information collection and strengthening of the audit procedures would improve tax compliance. Income taxes will need to be simplified and expanded to new taxpayers and the rates and thresholds will need to be revised to increase revenue and correct the imbalances introduced in 2011. Excises will need to be streamlined and revised upwards, and fuel taxes increased and stabilized through a specific duty within a price structure that automatically adjusts to international prices. Selected additional revisions to mining conventions could be undertaken and the new mechanisms on transfer prices properly implemented. A rapid roll-out of real estate taxation and a gradual elimination of tax exemptions should also be considered.

Pillar II. Strengthening Fiscal Institutions

21. Budget execution in Guinea has been characterized by a stop-and-go pattern in the past years, reflecting the volatility of revenue and credit constraints, in which domestically-financed investment has played an adjustor role. All major expenditure categories (as a share of GDP) display higher volatility in Guinea than in comparable countries. In particular, domestically-financed investments have shown considerably higher volatility, reflecting the continued use of this line to keep the budget within the available financing envelope and limiting the contribution of fiscal policy to sustain economic growth (Figure 9).

Figure 9.
Figure 9.

Guinea and Comparable Countries: Recent Evolution of Main Expenditure Items

(Percent of GDP)

Citation: IMF Staff Country Reports 2016, 262; 10.5089/9781475520958.002.A001

Sources: Guinean authorities; and IMF Staff calculations.

22. Implementing a MTBF will help authorities to better manage the budget, and improve its contribution to growth, by stabilizing expenditure levels. In general terms, a MTBF is mainly anchored on revenue forecasts derived from a consensual macroeconomic forecast and strategic spending priorities drawn from the Poverty Reduction Strategies and other high-level development programs. This double anchor ensures that the level of planned expenditures is consistent with available financing, and that their composition is aligned with national priorities. These anchors also help broaden the legitimacy of the budget and budget processes beyond the realm of short-term politics by relying on a wider social consensus to counterbalance proponents of self-interested opportunistic deviations.

23. Adoption of an MTBF would dovetail with and strengthen many other necessary expenditure management initiatives. A major goal of these initiatives should be to stabilize the evolution of main expenditure aggregates (see Figure 9) and free up resources that can be better used to spur growth. Key initiatives should include:

  • Wages and Salaries: (1) Maintain the efforts to purge the payroll from ghost workers; (2) Implement a full review of existing posts in order to gradually streamline or reallocate non-necessary excess capacity; (3) Review the (now annual) wage settlement processes with unions; (4) Standardize and make more transparent the many types of remuneration (primes de craie, etc.); (5) Gradually expand staff in the health and education sectors (in line with the PRS).

  • Transfers and subsidies: (1) Agree with EDG on a multiyear plan to phase out subsidies and raise electricity tariffs in the short to medium term; (2) Review subsidies policies to other sectors, such as higher education, which might be regressive.

  • Investments: (1) Adopt a multiyear investment framework in which projects are selected and prioritized based on cost-benefit analyses in line with the PRS, and implement transparent evaluation processes to evaluate construction timelines and costs; (2) Identify financing (domestic vs. foreign) and international partners for key projects; (3) Perform ex-post evaluations.

24. Effective revenue mobilization, adoption of a MTBF along with sustained advances in PFM could help identify additional external support. Most traditional donors have very stringent accountability frameworks and need to report on the use of aid resources. For this reason, they are more likely to participate and engage through sustainable long-term commitments if they understand the authorities’ expenditure strategy and value efforts to increase own-revenues. Inviting donors to participate in the elaboration of the MTBF would further strengthen their resolve and create the atmosphere of trust necessary to implement longer term financing agreements and financial commitments.

25. Strengthening Public Investment Management (PIM) institutions will improve the rates of return of the planned investments. Yields from improving investment execution processes could be as high as 40 percent.7 Guinea’s capital budgeting process suffers from lack of coordination among ministries, there is no mechanism to prioritize the various investment projects, and the investment budget has typically borne the weight of fiscal adjustments. The investment program should include clear selection criteria based on cost-based analysis framework aligned with the development strategy. Allowing some carryover of appropriations, when feasible, could help protect priority investments from short-term pressures. Authorities agreed in principle with the policy proposals, stressed that in the short term the Souapiti project was the priority, and that in the medium term other measures (such as the introduction of a MTBF) could be considered for a second round of reforms.

26. Authorities should also explore new financing vehicles, such as Public-Private Partnerships (PPP), with caveats.8 These agreements can carry significant fiscal risks through the issuance of contingent. Annual payments or user fees could depend to the terms of financing obtained by the private party, in which case authorities and/or users would be exposed to international interest rate and exchange risks. Maintenance and repair costs could also eschew to the government if damages were related to political instability or natural disasters. For these reasons, a scrupulous analysis of PPP terms is necessary.

27. Continued reliance on concessional financing, and efforts to improve management of debt, contingent liabilities and PPPs would help contain the buildup of debt vulnerabilities. While Guinea continues to face a moderate risk of external debt distress, short term vulnerabilities have increased significantly.9 It will be important to carefully monitor the accumulation of new debt to avoid a rapid increase in the burden of debt service given limited budget flexibility and the need to preserve priority spending. A better coordination and management of debt is also warranted.

F. Concluding Remarks

28. Guinea stands to benefit substantially from a scaling-up of public investment. Increased capital in the energy, transport, health and education are a critical priority to unlocking Guinea’s long-term potential and improving resilience. Model-based estimates suggest that the GDP per capita benefits from the authorities PIP could stand in the vicinity of 2–4 percent. However, ensuring that the expected growth and poverty reduction gains are realized requires the implementation of an accompanying fiscal strategy to preserve macroeconomic stability.

29. The strategy to build up fiscal space should be all-encompassing. Revenue mobilization will be essential to sustaining increased public investment rates, and closing tax revenue gaps could yield additional resources for up to 5 percent of GDP. Savings in the current spending budget can also free space to finance investment. Significantly improving PFM processes would contribute to unlock donor support while strengthening PIM institutions will improve the rates of return of the planned investments. Continued reliance on concessional financing, and efforts to improve management of debt, contingent liabilities and PPPs would also help contain the buildup of debt vulnerabilities

1

Most notably the Ebola epidemic in 2014–15, and the 2015 fall in commodity prices.

2

An EPC contract (turnkey) is a particular form of contract where the contractor is made responsible for the engineering, procurement and construction activities. When the project is completed, the contractor hands over the project to the owner.

3

To be signed. Preliminary discussions on the terms include 20 year-maturity, 2 percent interest rate, and 5 year-grace period (grant element of 22.7 percent).

4

The increase in the tax rate in the baseline scenario after 2020 would be required to cover the lower access to concessional debt.

5

Note that the model is not set-up to capture the equity component of the Souapiti financing, which would suggest an overestimation of the tax adjustment required.

6

IMF, 2015, “Revenue Needs, Tax Potential and Revenue Mobilization in Guinea”.

7

IMF (2015), “Making Public Investment More Efficient”.

8

A typical PPP involves the financing, construction and operation of a public asset (e.g., a road) by a private partner who is then compensated by users of the assets or by direct payments from the government. The asset is handed over to the government at the end of pre-determined period. PPPs can thus avoid directly increasing the debt and help circumvent liquidity constraints.

9

See EBS 16/14.

Same Series

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Cover IMF Staff Country Reports
Guinea: Selected Issues
Author: International Monetary Fund. African Dept.
Volume/Issue:
Volume 2016: Issue 262
Publisher:
International Monetary Fund
ISBN:
9781475520958
ISSN:
1934-7685
Pages:
46
DOI:
https://doi.org/10.5089/9781475520958.002

Guinea: Public Investment in Guinea: Comparison Between the Projections of the Last Article IV (2012) and Outcomes

(Percent of GDP)

Guinea: Total Public Debt Across Scenarios

Guinea: Unconstrained Tax Adjustment

Guinea: Tax Adjustment and External Commercial Debt

Guinea: Tax Adjustment and Domestic Debt

Guinea: First Alternative Scenario Under Different Financing Options

Guinea: The Importance of Structural Factors

Guinea: Non-resource Revenue (Excluding Grants)

(Percent of GDP)

Guinea and Comparable Countries: Recent Evolution of Main Expenditure Items

(Percent of GDP)