IMF Executive Board Concludes the 2021 Article IV Consultation with Guinea

June 30, 2021

Washington, DC: On June 21, 2021, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Guinea.

Although overall growth was strong, at 7.1 percent of GDP in 2020, buttressed by a buoyant mining sector, the non-mining economy—which employs the vast majority of the population—was significantly affected by the Covid-19 pandemic. Inflation surpassed 10 percent at end- 2020 and has since accelerated to above 12 percent, as a result of rising food prices and freight rates associated with COVID-19-related supply disruptions, as well as the impact of the policies to respond to the pandemic. The current account deficit increased to 13.7 percent of GDP as imports of management, freight, and telecommunications services spiked, offsetting strong export growth from the mineral sector. Reserves continued to rise, partly a result of donor support during the pandemic, reaching USD 1.3 bn at end-2020. The fiscal deficit reached close to 3 percent of GDP, reflecting the implementation of the authorities’ crisis response plan to expand health spending and support vulnerable households and the private sector and that the improved mining production did not translate into higher fiscal revenue. As a result, public debt increased to 43.4 percent, also reflecting the first disbursement of the large loan for the Souapiti dam project. Monetary policy was accommodative, which, together with accommodative regulatory measures, helped sustain the supply of credit to the economy. The crisis deteriorated already weak social indicators. In addition to a spike in COVID-19 cases in April 2021, Guinea also faced an additional health challenge due to a new Ebola outbreak in February 2021—fortunately localized. The Guinean authorities and the WHO declared the end of the Ebola outbreak on June 19. The authorities started vaccinating the population against COVID-19 and Ebola in March 2021.

Real growth is projected to remain strong in 2021, at 5.2 percent, supported by continued robust growth in the mining sector, and compounded by a gradual recovery of the non-mining sector. Inflation is likely to remain above the BCRG's single digit target throughout the year. Risks are tilted to the downside, mostly reflecting the potential for an intensification of the COVID-19 pandemic. Commodity price shocks are another significant source of vulnerability. Other external risks include reduced availability of donor financing and increased geopolitical tensions. Guinea is also increasingly vulnerable to climate change. On the upside, mining activity could increase faster than expected. Accelerated implementation of investment activities, particularly the Simandou iron ore project, would also provide a significant boost to growth.

Executive Board Assessment [2]

Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities for their prompt response to the COVID‑19 pandemic, which took a significant toll on the non‑mining economy and social outcomes. Directors welcomed Guinea’s resilient growth in 2020 and noted the favorable near‑term outlook, subject to downside risks. They emphasized that implementing the vaccination plan and maintaining targeted support for vulnerable households and businesses remain key priorities. Directors stressed the need to diversify the economy and secure more inclusive, balanced, and sustainable growth over time.

Directors encouraged continued efforts to create fiscal space for investment in infrastructure, human capital, and social protection. They highlighted the urgency of domestic revenue mobilization, particularly from the mining sector. Specifically, they recommended addressing profit shifting risks from transfer mispricing, fully applying the Mining Code to new contracts, minimizing tax exemptions, and adopting the General Tax Code. Directors called on the authorities to enhance spending efficiency and eliminate energy subsidies. They also encouraged the authorities to continue strengthening public financial management and maintaining prudent external borrowing policies, maximizing recourse to concessional financing and grants to safeguard debt sustainability.

Directors emphasized the need to address rising inflation, including by accelerating the repayment of central bank advances. They encouraged the authorities to limit monetary financing of the budget and continue modernizing the monetary policy framework, with a focus on more active liquidity management and clearer communication of monetary targets. Directors also underscored that exchange rate flexibility would help build reserves and absorb the impact of shocks. They welcomed the transparent rules‑based foreign exchange intervention policy and its contribution to external rebalancing.

Directors encouraged further diversification efforts, prioritizing measures to strengthen the business climate and the financial sector, promote digitalization, and boost human capital development. They welcomed recent improvements in governance and encouraged the authorities to continue strengthening the anti‑corruption framework, including by swiftly adopting and implementing the national strategy and the asset declaration regime.

It is expected that the next Article IV consultation with Guinea will be held on the standard 12‑month cycle.

Figure 1. Guinea: Selected Economic and Financial Indicators, 2019-22

2019

2020

2021

2022

Act.

Prel.

Proj.

Proj.

Annual percentage change, unless otherwise indicated

National accounts and prices

GDP at constant prices

5.6

7.1

5.2

6.1

Mining

9.4

34.6

7.7

7.1

Non-mining

4.9

1.3

4.5

5.8

GDP deflator

9.9

10.7

11.3

9.7

GDP at market prices

16.2

18.6

17.0

16.4

Consumer prices (average)

Average

9.5

10.6

11.6

9.9

End of period

9.1

10.6

11.3

9.9

External sector

Exports, f.o.b. (US$ terms)

-0.8

126.4

0.6

-9.8

Imports, f.o.b. (US$ terms)

-21.1

76.0

-4.7

-16.4

Average effective exchange rate (depreciation -)

Nominal index

2.4

-2.4

…

…

Real index

9.3

5.9

…

…

Money and credit

Net foreign assets¹

10.5

8.6

7.9

10.8

Net domestic assets¹

12.4

15.3

5.1

7.0

Net claims on government¹

4.0

18.3

0.6

3.2

Net claims on government¹, excl. recapitalization

4.0

17.4

-1.1

2.4

Credit to non-government sector¹

8.9

3.2

4.5

4.7

Reserve money

16.6

19.2

12.2

13.4

Broad money (M2)

22.9

23.0

13.7

17.8

Percent of GDP, unless otherwise indicated

Central government finances

Total revenue and grants

14.4

12.8

14.9

14.7

Revenue

13.9

11.8

13.2

14.1

Of which: Non-mining revenue

12.0

10.2

11.5

12.2

Grants

0.5

1.0

1.7

0.5

Total expenditure and net lending

14.9

15.7

17.1

17.6

Current expenditure

11.1

12.4

11.8

11.3

Of which: Interest payments

0.5

0.7

0.9

0.9

Capital expenditure and net lending

3.7

3.2

5.2

6.1

Overall budget balance

Including grants

-0.5

-2.9

-2.2

-2.9

Excluding grants

-1.0

-3.9

-3.9

-3.4

Basic fiscal balance

0.6

-1.4

-0.1

0.6

Current account balance

Including official transfers

-10.8

-13.7

-9.3

-11.6

Excluding official transfers

-11.0

-14.3

-10.0

-11.6

Overall balance of payments

1.9

-0.9

0.6

1.1

Memorandum items:

Exports, goods and services (US$ millions)

4,130.8

8,996.0

9,012.6

8,134.6

Imports, goods and services (US$ millions)

5,026.9

9,938.4

8,888.8

7,679.6

Overall balance of payments (US$ millions)

257.8

-131.0

100.7

204.8

Net foreign assets of the central bank (US$ millions)

843.3

948.5

1,273.9

1,645.1

Gross available reserves (months of imports)²

2.1

2.2

2.4

2.5

External public debt, incl. IMF (percent of GDP)

19.9

25.8

28.6

30.9

Total public debt, incl. IMF (percent of GDP)

38.0

43.4

43.3

42.9

Nominal GDP (GNF billions)

124,109

147,188

172,280

200,493

Sources: Guinean authorities; and Fund staff estimates and projections.

¹ In percent of the broad money stock at the beginning of the period.

² In months of following years’ imports, excluding artisanal gold related imports. Previous staff reports have reported a coverage ratio using imports net of capital goods.


[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.

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