IMF Executive Board Approves US$71 Million in Emergency Financing Support and Concludes 2022 Article IV Consultation with Guinea

IMF Executive Board Approves US$71 Million in Emergency Financing Support and Concludes 2022 Article IV Consultation with Guinea

December 22, 2022

• Growth is expected to reach 4.7 percent in 2022 and 5.6 percent in 2023, driven by continued strength in the mining sector, though the non-mining sector is grappling with the impact of international price shocks.
• The Executive Board also approved a disbursement of SDR 53.55 million (about US$71 million) to Guinea under the new Food Shock Window of the Rapid Credit Facility.
• Guinea is facing a challenging economic and food insecurity situation. Containing the effects of the price shocks and cushioning its impact on food security remain the key short-term policy priorities.

Washington, DC: The Executive Board of the
International Monetary Fund (IMF) concluded the Article IV consultation

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with Guinea. Growth is expected to reach 4.7 percent in 2022 and 5.6
percent in 2023, driven by continued strength in the mining sector, though
the non-mining sector is grappling with the impact of international price
shocks.

The Executive Board also approved today a disbursement of SDR 53.55 million
(US$71 million) under the Food Shock Window of the Rapid Credit Facility to
help Guinea address urgent balance of payment needs related to the global
food crisis. Food insecurity in Guinea has increased significantly owing to
the international food and fertilizer prices shock. The UN 2022 Global
Report on Food Crises considers Guinea to have a major food crisis, with a
large share of the population affected by acute food insecurity and
worsening malnutrition. The population is also affected by a precarious
post-pandemic recovery of the non-mining sector.

Following the Executive Board’s discussion, Ms. Gita Gopinath, First Deputy
Managing Director and acting Chair, issued the following statement:

“Guinea’s chronic food insecurity was significantly exacerbated in 2022 as
a result of the international food and fertilizer price shock, threatening
the fragile post-pandemic recovery of the non-mining sector. Together with
the increase in fuel prices, external performance in 2022 is expected to
have deteriorated, resulting in weaker-than-desirable foreign reserve
coverage. Inflation remains high, partly driven by food prices. Emergency
financial assistance under the RCF’s new Food Shock Window would help
address urgent balance-of-payments needs and mitigate the impact of the
food shock. The authorities’ plan to use the resources to support the most
vulnerable, in coordination with the World Food Program, and to provide
fertilizers to improve the next harvest, is welcome. Ensuring the
transparent and effective use of the resources will be essential.”

“Mobilizing domestic revenue, including from the mining sector, and
improving the quality of expenditure, via a reduction in regressive
subsidies and better public investment management, will help create
additional space to invest in infrastructure, education, and social
protection, enhancing Guinea’s growth potential while preserving debt
sustainability.”

“Guinea remains at moderate risk of debt distress, with some space to
absorb shocks but limited space for new borrowing. Maximizing the
concessionality of new debt, tapping domestic financing sources,
strengthening debt management capacity, and enhancing public investment
management will be crucial in preserving medium-term debt sustainability. “

“Maintaining a tight monetary policy and ensuring that central bank lending
to the government remains within the statutory limit are critical to
contain inflation. The development of a new consumer price index covering
the entire country is welcome; it will be important for the central bank to
introduce it gradually, according to best practice.”

“Economic diversification will be essential to sustain growth over time and
make it more resilient and inclusive. A sound implementation of the
Simandou iron ore project should be a key priority, while addressing
weaknesses in governance will also be important. In this regard, moving
ahead in the implementation of the 2021 safeguards assessment
recommendations and improving governance and the anti-corruption system as
well as the AML/CFT regime are welcome steps.”