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Guinea: Third Review Under the Three-Year Arrangement Under the Extended Credit Facility, and Financing Assurances Review-Staff Report and Press Release
Summary:EXECUTIVE SUMMARY The political situation was difficult throughout most of 2013 but has stabilized in the last few months. Disputes between government and opposition on preparations for legislative elections at end-September resulted in serious civil unrest but the situation is improving since the elections. The new Parliament was inaugurated on January 13, 2014, formally ending the transition period following the 2009–10 military regime. On January 20, 2014, the President nominated a new government, with key economic ministers carrying over from the previous government, albeit in different posts. The macroeconomic environment in 2013 was difficult, reflecting the fragile socio-political situation and a sharp slowdown in mining sector projects. As a result, growth is estimated to have slowed to 2.5 percent, sharply below the projected 4.5 percent. Inflation continued to fall and at end-2013 was 10.5 percent year-on-year. International reserves were maintained at a satisfactory level and the exchange rate remained broadly stable. Performance under the ECF-supported program remains satisfactory. Notwithstanding a sizeable shortfall in revenues and an increase in subsidies to the energy sector, strong adjustment measures have kept the fiscal deficit on track. All performance criteria (PCs) for end-June 2013 and the indicative targets for end-September 2013 were met with significant margins, and those for end-2013 are also expected to be met. However, the structural reform agenda incurred delays. The program for 2014 focuses on further consolidating macroeconomic stability, while increasing public investment to rebuild the country’s infrastructure. Real GDP is projected to rebound to 4.5 percent, reflecting a return to political stability and an acceleration of investment in the mining sector. Inflation is projected to further decline to 8.5 percent, while gross official reserves should remain at around 3 months of imports. Fiscal targets incorporate an increase in public investment, a strong revenue effort, and an increase in external assistance. Structural reforms aim at completing the actions delayed from 2014 and focus on public financial management, civil service reform, the mining sector, the business climate, agriculture, and the electricity sector. Risks to the program stem from a possible renewal of political instability, delays in the rebound of investment in the mining sector, and failure to reach the revenue targets. Staff supports the completion of the third review under the ECF arrangement and completing the financing assurances review. Completion of the review will result in a disbursement of an amount equivalent to SDR 18.36 million under the ECF arrangement.
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