Washington, DC — An International Monetary Fund (IMF) mission visited Conakry during July 19-August 8, 2012 to conduct discussions on the first review of a program supported by the Extended Credit Facility (ECF), which was approved by the IMF Executive Board on February 241, 2012 (see Press Release No. 12/57) in the amount of SDR128.52 million (about US$194.50 million).
The mission met with H.E. Prof. Alpha Condé, President of the Republic of Guinea; Hadja Rabiatou Sera Diallo, President of the interim parliament (CNT); Mr. Mohamed Said Fofana, Prime Minister; Mr. Kerfalla Yansané, Minister of Economy and Finance; Mr. Lounceny Nabé, Governor of the Central Bank; and other members of the government.
The mission also met with other members of the CNT, members of civil society, trade unions and the donor community. Discussions focused on recent economic developments and growth prospects, policy implementation under the ECF-supported program, structural reforms, and progress towards the HIPC completion point.
At the conclusion of the mission, Mr. Harry Snoek, Deputy Division Chief in the IMF's African Department, issued the following statement:
"The Guinean authorities have reached agreement ad referendum on policies that could, subject to approval by IMF management and the Executive Board, be supported by the second disbursement under the ECF arrangement of SDR 18,36 million (about US$27.79 million) in September.
In addition, the mission held staff-level discussions in preparation of the completion point under the Heavily Indebted Poor Countries (HIPC) Initiative. Following the conclusion of the first review under the ECF arrangement, the completion point triggers are expected to have been met, laying the basis for reaching the HIPC completion point--and the associated major debt reduction--possibly by end-September 2012.
"Guinea's economy continues to grow rapidly in 2012, boosted by accelerating investment in the mining sector and strong growth in agriculture. Twelve-month inflation, which peaked at 21 percent at end-2010, continues its downward trend, reaching 15 percent at end-June 2012, and the exchange rate stabilized. This good performance is the result of strong efforts to restore budget discipline and avoid the need for bank-financing of the budget by keeping expenditures in line with available resources, supported by tight monetary policies of the central bank. Government revenue increased by more than expected for the first half of 2012, helped by improved collection efforts and despite large losses from fuel subsidies. Expenditure stayed well within budget targets. Key program targets for end-June were observed.
"Good progress has also been made in the implementation of structural reforms. The mission welcomes the progress with modernizing public financial management legislation, preparing the implementation regulations of the 2011 mining code, and in revising the investment code. Important progress has also been made in strengthening management of the electricity company and improving electricity production. A new system of providing support to the agricultural sector is also being implemented.
"The mission recommends that the authorities make further progress in debt management, including by ensuring that borrowing by all government-owned entities remains strictly under control of the Ministry of Economy and Finance to ensure debt-sustainability. For the same reason possible government participation in mining sector projects should be financed only by project revenue without recourse to the budget.
"The prospects for the remainder of 2012 and 2013 are positive. Economic growth is expected to be around 5 percent, on average, while inflation should continue to decline. The recent good performance of budget revenue has provided some room to finance additional budget outlays, and development expenditure, partly financed from exceptional mining revenue received in 2011, will continue to focus on strengthening infrastructure, especially in the electricity sector and for roads.
"The government's reform program is set to continue, with key priorities being the completion of the regulation to implement the mining code and the review of mining contracts, electricity and agricultural sector reforms, and improvements in the business climate. Supported by external partners, strengthening of public financial management and tax reform will also continue. The government intends to use the additional resources freed by the expected debt relief following attainment of the HIPC completion point for priority sector expenditure. The mission takes note of the authorities' pledge to improve human and institutional capacity of Guinea's administration to conduct successfully the reform process.
"The IMF team thanks the authorities for their hospitality and for the constructive discussions."
1 The ECF is the IMF's main tool for medium-term financial support to low-income countries. Financing under the ECF currently carries a zero percent interest rate, with a grace period of 5Â½ years, and a maturity of 10 years.