An IMF mission led by Harry Snoek visited Conakry during May 22 - June 6, 2014 to conduct discussions on the fourth review of a program supported by an arrangement under the Extended Credit Facility (ECF),i which was approved by the IMF Executive Board on February 24, 2012 (see Press Release No. 12/57) in the amount of SDR 128.52 million (about US$198 million).
The mission met with President Alpha Condé, Prime Minister Fofana State Minister of Economy and Finance, Mr. Mohamed Diaré, the Governor of the Central Bank of the Republic of Guinea, Mr. Lounceny Nabé, and other senior government officials.
The discussions focused on recent economic developments and growth prospects, policy implementation under the ECF-supported program in 2013, and policies and structural reforms for 2014.
At the conclusion of the mission Mr. Snoek issued the following statement:
"The Guinean authorities and IMF staff have reached agreement on a set of policies that, subject to approval by IMF management and the Executive Board, could be supported by the fifth disbursement under the ECF arrangement of SDR 18.36 million (about US$ 28 million).
"In 2013, Guinea's economy suffered from a difficult socio-political situation and a slowdown in mining activity. As a result, growth slowed to 2.3 percent. Despite the difficult environment, the fiscal deficit remained under control and all quantitative program targets for end-2013 were met.
Prudent fiscal and monetary policies supported a continued decline in inflation, from around 13 percent at end-2012 to around 10 percent in April 2014. The Central Bank's international reserves remained at safe levels and the exchange rate of the Guinean franc has remained stable.
"Preliminary data indicate that economic activity in the first five months of 2014 has remained subdued. This reflects the impact of the Ebola epidemic, but also continuing electricity shortages and slow progress on structural reform. The mission would like to take this opportunity to express its sympathy for the heavy toll in human life of the Ebola virus.
"Growth is projected to rebound in the second half of the year, buoyed by higher agricultural output, an increase in public infrastructure spending, and a gradual pick-up in mining sector activity following the recent signing of the investment framework for the Simandou iron ore project.
The authorities are targeting a continued decline in inflation to 8.5 percent by end-2014, and reserves should remain at around 3 months of imports. Within the limits of these targets, the authorities intend to continue to gradually ease monetary policy in support of higher growth.
"The discussions in the fiscal sector focused on the outlook for the budget for the remainder of the year. Revenue is projected to remain considerably below the initial budget's target.
However, additional available financing will allow maintaining a substantial increase in much needed investment. The mission encourages the authorities to press ahead with reforms to improve public financial management and build capacity, in particular in project preparation and implementation. Strong efforts to strengthen the electricity company are also needed to minimize its recourse to public funds and relieve the serious power shortages.
"The IMF mission stressed the need to accelerate structural reform to deliver Guinea's growth potential and improve living conditions for the population. The mission encourages the swift adoption of the new investment code to reduce uncertainty and promote investment.
It welcomes the new action plan to reform the judiciary and urges the authorities to quickly finalize the implementing regulations of the public procurement code and of the mining code. In this regard, the government's recent steps to coordinate and monitor structural reforms are encouraging.
"The IMF team thanks the authorities for their hospitality and for the constructive discussions."
i 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 5½ years, and a maturity of 10 years.