Press Release No. 13/58
February 25 2013
An International Monetary Fund (IMF) mission visited Conakry during February 7-22, 2013 to conduct discussions on the second review of a program supported by the Extended Credit Facility (ECF), which was approved by the IMF Executive Board on February 24, 20121 (see Press Release No. 12/57) in the amount of SDR128.52 million (about US$194.99 million). The mission was received by H.E. Prof. Alpha Condé, President of Guinea and Ms. Rabiatou Serah Diallo, President of the National Transition Commission. The mission also met with Mr. Kerfalla Yansané, State Minister of Economy and Finance; Mr. Mohammed Diaré, Deputy-Minister for the Budget; Mr. Lounceny Nabé, Governor of the Central Bank of Guinea; and other government members and senior officials. The mission also met with members of civil society, trade unions, employers' organizations, and the donor community. Discussions focused on recent economic developments and growth prospects, policy implementation under the ECF, and policies and structural reforms for 2013.
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 and the IMF have reached agreement ad referendum on policies that, subject to approval by IMF management and the Executive Board in April, could be supported by the second disbursement under the ECF of SDR 18,36 million (about US$27.85 million).
"Guinea's economy continued to grow at a good pace in 2012, although somewhat slower than anticipated due to difficulties in the mining sector. Inflation continued a downward trend during 2012, reaching just below 13 percent (year-on-year) in December. This good performance was the result of strong fiscal and monetary policies. Government revenue increased by more than expected helped by improved collection efforts and despite considerable fuel tax losses. Expenditure stayed well within budget targets. Bank financing of the budget was lower than programmed and excess liquidity in the economy fell. All but one of the quantitative performance criteria for end-December under the ECF arrangement were observed.
"The authorities continue to make progress with their ambitious structural reform agenda, although there were some delays. Many of the reforms are needed to strengthen public financial management, enhance management of the mining sector and increase government revenue, expand electricity supply, develop Guinea's abundant agricultural resources, and to improve the business climate. The mission welcomes the adoption of the new Organic Budget Law and the issuance by presidential decree of regulations on fiscal management and accounting, building on technical assistance from the IMF and other donors. Delays in completing the amendments to the new mining code, and in the adoption of the implementation regulations based thereon, were partly due to the intensive consultation process with stakeholders; this important reform should be completed as soon as possible. The mission would like to take this opportunity to congratulate the authorities with the recent publication of all contracts in the mining sector on the web-site of the Technical Committee charged with reviewing the mining titles and conventions.
"The mission recommends that the authorities rapidly implement the planned reform of the investment code, starting with the adoption of the Investment Policy Letter, which lays the basis for further measures planned for 2013 to make Guinea more attractive for investors.
"The prospects for 2013 are positive, although real growth is projected to be somewhat below the initial projection of 5 percent due to the slow-down in investment in the mining sector. The authorities continue to target a further decline in inflation, to below 10 percent at end-2013. However, the sharp increase in public sector wages agreed in December 2012 poses some risks to this outlook. Moreover, governance of the electricity company EDG and its financial situation will need to be strengthened quickly to control subsidies.
"The government's reform program is set to continue, with key priorities being public financial management and tax administration, the completion of the legislative arrangements in the mining sector, the review of mining titles and conventions, electricity and agricultural sector reforms, and efforts to improve the business climate. The government is also planning to accelerate civil service reform, based on a just-started biometric census and the action plan of the High Commission on Public Sector Reform. The mission encourages the authorities, trade unions and employers organizations to develop a consultative and medium-term approach to wage negotiations, taking into account macroeconomic stability and fiscal sustainability.
"The IMF team thanks the authorities for their hospitality and for the constructive discussions."
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 5˝ years, and a maturity of 10 years.