IMF Sanctions $71M Emergency Aid, Ends 2024 Guinea Consultation

• The Executive Board approved a disbursement of SDR 53.55 million (about US$71 million) to Guinea under the Exogenous Shocks Window of the Rapid Credit Facility to help Guinea address immediate needs associated with the explosion of the main fuel depot in late 2023.
• In part as a result of the explosion, growth is expected to decelerate to 4.1 percent in 2024 and rebound to 5.6 percent in 2025, sustained by a resilient mining sector.
• Key priorities for 2024 aim at addressing urgent financing needs, mainly linked to assistance to affected households, site cleaning, and decontamination and reconstruction, which could threaten growth and economic development if not addressed. In the medium term, mobilizing domestic revenues, modernizing tax administration, improving public finance management and investment efficiency, and increasing spending on education, health, and social protection will help boost productivity and reduce poverty.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) approved today a disbursement of SDR 53.55 million (about US$71 million) under the Exogenous Shocks Window of the Rapid Credit Facility to help Guinea address urgent balance-of-payment needs associated with the fuel depot explosion.

The emergency spending, which will be reflected in the revised budget law for 2024, includes transfers to affected households; the decontamination of the explosion site; the construction of housing, school, and health infrastructure; the rehabilitation of damaged public buildings; and the start of construction work on a modern and safe fuel depot.

Guinea's growth is expected to decelerate to 4.1 percent in 2024 amid fuel shortages and rebound to 5.6 percent in 2025, sustained by a resilient mining sector. Policies for 2024 aim at mitigating the impacts of the fuel explosion while minimizing deviations from medium-term growth and economic development objectives. In the medium term, mobilizing domestic revenues, especially from the mining sector, modernizing tax administration, improving public finance management and investment efficiency, as well as increasing spending on education, health, and social protection, while anchoring spending on available resources, will help boost productivity and reduce poverty.

The Executive Board also concluded the 2024 Article IV consultation with Guinea. A press release with the Executive Board's assessment of the consultation will be issued in due course.

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

"Emergency financial assistance under the Rapid Credit Facility will help address urgent balance-of-payments needs associated with the explosion of a major fuel import and storage facility in late 2023. Urgent needs include those related to the decontamination of the site, assistance to affected households, and reconstruction of buildings, infrastructure, and a new fuel depot.

"A temporary relaxation of the fiscal stance is warranted to respond to the explosion. Over the medium term, mobilizing domestic revenue, especially from the mining sector, and improving public finance management would create space for increasing spending on education, health, and social protection, helping to boost productivity, reduce poverty and preserve debt sustainability. Reforming the electricity sector to address shortages remains key.

"Guinea remains at moderate risk of debt distress, with some space to absorb shocks. However, domestic debt vulnerabilities have increased, reflecting government T-bonds issuance to finance high public investment spending. Prudent macroeconomic policies, including maximizing the concessionality of new debt, avoiding the repeated accumulation of domestic arrears, strengthening debt management capacity, and enhancing public investment management, remain key to preserving medium-term debt sustainability.

"The monetary authorities' readiness to tighten monetary policy, if needed, and to ensure that central bank lending to the government remains within the statutory limit will help contain inflationary pressures. The steadfast implementation of the government securities market action plan, designed with Fund assistance, would help create alternative avenues to finance the government and limit the sovereign-bank exposure, which has increased significantly.

"The implementation of structural reforms will help manage Guinea's vulnerability to domestic and external shocks and achieve sustained and inclusive growth. In this context, there is need to ensure that the Simandou iron ore project delivers the expected benefits for the Guinean economy, as well as to adapt to and mitigate climate change, address gender disparities, and to strengthen governance and transparency by fighting corruption and improving the anti-money laundering and counter-terrorism financing regime (AML/CFT). The implementation of the 2023 safeguards assessment recommendations will also be critical."

Guinea: Key Economic and Financial Indicators, 2021–25

(Percent of GDP, unless otherwise indicated)