Front Matter Page
IMF Country Report No. 18/234
GUINEA
FIRST REVIEW OF THE ARRANGEMENT UNDER THE THREE-YEAR EXTENDED CREDIT FACILITY, FINANCING ASSURANCES REVIEW, AND REQUEST FOR MODIFICATION AND FOR WAIVERS OF NONOBSERVANCE OF PERFORMANCE CRITERIA—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR GUINEA
July 2018
In the context of the First Review of the Arrangement Under the Three-Year Extended Credit Facility, Financing Assurances Review, and Request for Modification and for Waivers of Nonobservance of Performance Criteria, the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on June 25, 2018, following discussions that ended on April 26, 2018, 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 June 12, 2018.
An Informational Annex prepared by the IMF staff.
A Debt Sustainability Analysis prepared by the staffs of the International Development Association (IDA).
A Supplementary Information updating information on recent developments.
A Statement by the Executive Director for Guinea.
The documents listed below 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 IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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© 2018 International Monetary Fund
Front Matter Page
GUINEA
FIRST REVIEW OF THE ARRANGEMENT UNDER THE THREE-YEAR EXTENDED CREDIT FACILITY, FINANCING ASSURANCES REVIEW, AND REQUEST FOR MODIFICATION AND FOR WAIVERS OF NONOBSERVANCE OF PERFORMANCE CRITERIA
June 8, 2018
Executive Summary
Context. The Guinean economy is growing at a faster than anticipated pace on the back of buoyant mining activity. The growth momentum is expected to continue, with real growth at about 6 percent in 2018 and over the medium term. However, risks of instability are heightened by the current electoral cycle.
Program performance. Program performance against end-December 2017 targets was mixed. PCs on the basic fiscal balance, net government borrowing from the central bank and net domestic assets of the central bank were missed, as were the indicative targets (IT) on tax revenues and domestically-financed social safety programs. Most structural benchmarks were met. The authorities have started implementing a package of corrective measures for the missed end-December PCs and request waivers of nonobservance on this basis. Program performance improved in 2018 and the IT at end-March 2018 on the basic fiscal balance was met by a large margin.
Program strategy. Achieving high and broad-based growth while preserving macroeconomic stability is key. Program fiscal targets over 2018–19 have been strengthened to recoup 2017 slippages and preserve debt sustainability. A package of adjustment measures of 2.8 percent of GDP will support achieving the 2018 fiscal target. Building external buffers, maintaining moderate inflation, and safeguarding financial sector stability will strengthen resilience. Scaling-up of growth-supporting public investments needs to be balanced with preserving stability. Social safety nets will be strengthened to reduce poverty. Advancing structural reforms is needed to foster private sector development.
Staff views. In view of corrective measures, staff supports the authorities’ request for completion of the first review under the ECF arrangement and for waivers of nonobservance of the missed end-December 2017 PCs. This would result in the disbursement of SDR 17.213 million and catalyze donor support. The program is subject to significant risks and strong ownership is key to foster program success.
Approved By
Dominique Desruelle Kevin Fletcher
An IMF team consisting of Ms. Albertin (Head), Mr. Egoume, and Ms. Sian (all AFR), Ms. Khalid (FAD), Mr. Yang (SPR) and Mr. Sulemane (Resident Representative), and Mr. Diallo (local economist) held discussions with the authorities in Conakry, Guinea during April 3–15, 2018 and during April 17–26, 2018 in Washington DC. Mr. N’Sondé and Mr. Bah (Senior Advisors to the ED) joined the discussions. The team met with President of the Republic Alpha Condé, President of the National Assembly Claude Kory Kondiano and the Economic and Finance Commission of the National Assembly, Minister of Economy and Finance Malado Kaba, Central Bank Governor Lounceny Nabé, Minister of Budget Mohamed Doumbouya, Minister of Planning and Cooperation Kanny Diallo and other members of the government, the Ministers Counselors to the President and other senior government officials. The IMF team also met with representatives of the donor community, civil society, trade unions, private sector and banks. Ms. Cooray provided research support and Ms. Malouf-Hardesty provided assistance for the preparation of this report.
Contents
CONTEXT AND BACKGROUND
RECENT ECONOMIC AND FINANCIAL DEVELOPMENTS
PERFORMANCE UNDER THE PROGRAM
OUTLOOK AND RISKS
PRESERVING MACROECONOMIC STABILITY
A. Fiscal Policy
B. Monetary and Exchange Rate Policies
SCALING-UP INFRASTRUCTURE INVESTMENT WHILE PRESERVING DEBT SUSTAINABILITY
STRENGTHENING SOCIAL SAFETY NETS
ADVANCING GROWTH-SUPPORTING STRUCTURAL REFORMS
PROGRAM MODALITIES
STAFF APPRAISAL
FIGURES
1. Pervasive Poverty, Weak Social Outcomes, and Gender Inequality
2. Sectoral Contributions to Real GDP Growth
3. Headline and Core Inflation
4. Current Account, FDI and Reserves
5. Real Effective Exchange Rate
6. Revenues and Expenditures Performance
7. Fiscal Imbalances and Central Bank Financing
8. Reserve Requirements
9. Commercial Banks—Credit to Government and Private Sector
10. Bauxite Production Capacity
11. Sectoral Contribution to Real GDP Growth
12. Taxes on International Trade and Effect of Petroleum Products Prices Increase
13. Savings in Electricity Subsidies, 2018
14. Business Climate
15. Governance
16. Recent Economic Developments
17. Fiscal and Monetary Indicators
TABLES
1. Key Economic and Financial Indicators, 2015–23
2. Balance of Payments, 2015–23
3a. Fiscal Operations of the Central Government, Billions of Guinean Francs, 2015–23
3b. Fiscal Operations of the Central Government, Percent of GDP, 2015–23
4. Central Bank and Deposit Money Accounts, 2015–23
5. Monetary Survey, 2015–23
6. Financial Soundness Indicators, 2015–17
7. Indicators of Capacity to Repay the IMF, 2018–26
8. Schedule of Disbursements and Timing of Reviews Under the ECF Arrangement, 2017–20
9. Projected External Borrowing
10. Risk Assessment Matrix
ANNEXES
I. Strengthening Mining Sector Tax Revenues
11. Sources of Inflation
III. Strengthening Banks’ Credit Provision to the Private Sector
IV. Capacity Building Framework Strategy Note: Update
APPENDICES
I. Letter of Intent
Attachment I. Supplementary Memorandum of Economic and Financial Policies
Attachment II. Technical Memorandum of Understanding
Front Matter Page
GUINEA
FIRST REVIEW OF THE ARRANGEMENT UNDER THE THREE-YEAR EXTENDED CREDIT FACILITY, FINANCING ASSURANCES REVIEW, AND REQUEST FOR MODIFICATION AND FOR WAIVERS OF NONOBSERVANCE OF PERFORMANCE CRITERIA—INFORMATIONAL ANNEX
June 8, 2018
Prepared By
African Department
(In Consultation with Other Departments)
Contents
RELATIONS WITH THE FUND
RELATIONS WITH THE WORLD BANK, 2014–17
JOINT WORLD BANK-FUND MATRIX
RELATIONS WITH THE AFRICAN DEVELOPMENT BANK, 2011–17
SUSTAINABLE DEVELOPMENT GOALS
STATISTICAL ISSUES
Front Matter Page
GUINEA
FIRST REVIEW OF THE ARRANGEMENT UNDER THE THREE-YEAR EXTENDED CREDIT FACILITY, FINANCING ASSURANCES REVIEW, AND REQUEST FOR MODIFICATION AND FOR WAIVERS OF NONOBSERVANCE OF PERFORMANCE CRITERIA—DEBT SUSTAINABILITY ANALYSIS UPDATE
June 8, 2018
Approved By
Abebe Aemro Selassie (IMF) and Paloma Anos-Casero (IDA)
Prepared by the International Monetary Fund and the International Development Association
The results of the update of the Debt Sustainability Analysis (DSA) show that Guinea continues to be at a moderate risk of external debt distress. 1,2 All external debt burden indicators under the baseline scenario lie below their policy-dependent thresholds and debt dynamics have improved compared to the 2017 DSA, given higher-than-anticipated growth during 2016–17. Stress tests suggest that debt vulnerabilities owing to accumulation of external debt related to financing of infrastructure projects will increase if adverse shocks materialize, though remaining more contained than in the 2017 DSA. Under most extreme stress tests,3 all solvency and liquidity indicators except one breach their thresholds and for prolonged periods. The inclusion of domestic debt does not significantly change the conclusion of the external DSA. A prudent external borrowing strategy aimed at maximizing the concessionality of new debt, limiting non-concessional loans in line with programmed amounts, and strengthening debt management will be key to preserving medium-term debt sustainability.
Front Matter Page
GUINEA
FIRST REVIEW OF THE ARRANGEMENT UNDER THE THREE-YEAR EXTENDED CREDIT FACILITY, FINANCING ASSURANCES REVIEW, AND REQUEST FOR MODIFICATION AND FOR WAIVERS OF NONOBSERVANCE OF PERFORMANCE CRITERIA—SUPPLEMENTARY INFORMATION
June 21, 2018
Approved By
Dominique Desruelle (AFR) and Kevin Fletcher (SPR)
Prepared by the African Department in consultation with other Departments
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Press Release No. 18/254
FOR IMMEDIATE RELEASE
June 25, 2018
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