Sierra Leone Telegraph: 2 May 2021:
The IMF Mission to Guinea has on the 28th April 2021, completed its 2021 Article IV Consultation discussions with authorities in Guinea, West Africa. At the end of the mission, the team led by Ms. Clara Mira, said that Guinea’s economic growth is expected to reach 5.2 percent in 2021 driven by continued strength in the mining sector, even as the country grapples with a second wave of Covid-19 infections and an Ebola outbreak. Non-mining growth remains subdued and is not expected to fully recover until 2022.
The team also said, however, that “immediate policy priorities remain continuing to respond to the pandemic, including by fast-tracking large-scale vaccinations, stepping up efforts to support vulnerable populations and supporting the economic recovery.
“The authorities are encouraged to continue their efforts to mobilize domestic revenue –including from the mining sector—to create fiscal space to finance the pressing human capital and infrastructure development needs. Reforms to strengthen governance and the business climate will boost diversification and provide for a more resilient and inclusive recovery.”
At the conclusion of the visit, Ms. Mira made the following statement:
“The Guinean economy weathered the Covid-19 shock with strong growth of 7 percent in 2020, driven by a booming mining sector. However, despite the implementation of a swift and well-structured response plan, the pandemic took a significant toll on the non-mining economy, which accounts for over ¾ of total GDP and employs the vast majority of the population.
“While the mining sector is expected to continue to bolster overall growth in 2021, Guinea is facing a twin health shock, with rising Covid-19 cases coupled with a recent new outbreak of Ebola, which fortunately appears localized and under control. As such, non-mining sector growth is expected to recover only gradually.
“In recent months, rising food prices and freight rates associated with Covid-related supply disruptions, as well as the impact of the loosening of the fiscal and monetary policies to respond to the pandemic, have driven overall inflation to above 12 percent.
“The current account deteriorated as imports of management, freight, and telecommunications services spiked, mitigating the strength in the goods balance from strong mineral exports. Reserves have continued to rise gradually, reaching USD 1.3 bn at end-2020.
“The 2020 fiscal outturns reflect the impact of the implementation of the authorities’ Covid-19 Plan de Riposte. Capital expenditure was under-executed. Public debt reached 44 percent of GDP at end-2020, including due to the frontloading of the first disbursement of the loan for the Souapiti dam.
“The mission welcomes the authorities’ stated objective of increasing domestic revenues over the next two years, including by introducing performance contracts, and recommended that the new Tax Code be promptly adopted.
“The mission was also encouraged by the recent efforts to digitalize taxation. However, greater efforts will be needed to mobilize revenue from the mining sector. This will require application of the Mining Code to all new contracts and further work on transfer pricing issues.
“The authorities are working on procuring Covid-19 vaccines, with some assistance from development partners, including the COVAX initiative. Development partners are expected to support Guinea’s efforts to vaccinate a significant share of its population in 2021, providing grants and concessional loans.
“The mission also noted the need to continue reforms to improve the quality of expenditure by improving public investment management and public financial management, phasing out electricity subsides and gradually transitioning towards an automatic fuel price adjustment system.
“The timing of the latter reforms should be carefully assessed, and implementation prudently phased and well-communicated, while support to the most vulnerable should be strengthened. The savings from the energy sector reforms could be used to strengthen the social safety net system. Debt sustainability will need to be preserved by maintaining a prudent borrowing strategy.
“The central bank took an appropriately accommodative stance during the pandemic. As the pandemic subsides, the authorities are encouraged to take action to bring inflation back to single digits through active liquidity management. The Treasury’s repayment of central bank advances would support the BCRG’s efforts to reduce inflation.
“The mission commended the BCRG for its broadly consistent implementation of a rule-based FX intervention policy since November 2020, which has brought greater flexibility to the foreign exchange market. Furthermore, efforts to encourage digitalization and more inclusive access to financial services are beginning to bear fruit.
“The mission acknowledged progress in improving governance and the business climate. Commitments linked to the 2020 Rapid Credit Facility financing have been broadly implemented, with an audit on Covid-related procurement due in June. The approval of the AML/CFT law was a major accomplishment.
“On the business climate, the newly created commercial court and the one-stop shop for international trade have been notable successes. The authorities are encouraged to continue making progress on reforms to the land registry and strengthening the anti-corruption framework, including by swiftly adopting and implementing the national strategy and the asset declaration regime.
“The mission recommended greater efforts to achieve more inclusive and resilient growth by strengthening governance, investing in human capital, and continuing digitalization efforts. Such efforts should facilitate diversification, which could leverage the current mining boom and build on the country’s richness in natural endowments, including agriculture.
“The team met with Prime Minister Ibrahima Kassory Fofana, Minister of Economy and Finance Mamadi Camara, Central Bank Governor Lounceny Nabé, Minister of Budget Ismael Dioubaté, Minister of Plan and Economic Development Kanny Diallo, Minister of Mining Adboulaye Magassouba, Minister of Public Works Kadiatou Emelie Diaby, Minister in charge of Investments and Public-Private Partnership Gabriel Curtis, Minister of Hydrocarbons Diakaria Koulibaly, and other senior officials, and representatives from the private sector, civil society and the development partner community.”