Guinea cen­tral bank needs struc­tural re­forms: IMF

The Pak Banker - - COMPANIES/BOSS -

The Ex­ec­u­tive Board of the In­ter­na­tional Mon­e­tary Fund (IMF) to­day com­pleted the sixth and sev­enth re­views of Guinea's eco­nomic per­for­mance un­der the pro­gram sup­ported by an Ex­tended Credit Fa­cil­ity (ECF) ar­range­ment.

The Board's de­ci­sion en­ables the im­me­di­ate dis­burse­ment of SDR 18.36 mil­lion (about US$25.6 mil­lion), bring­ing to­tal dis­burse­ments un­der the ar­range­ment to SDR 155.295 mil­lion (about US$216.7 mil­lion). The Board also ap­proved a re­quest for an ex­ten­sion of the cur­rent ECF ar­range­ment to end-Oc­to­ber 2016 to al­low time to as­sess the im­ple­men­ta­tion of the pro­gram at end-June 2016 as well as a rephas­ing of the re­main­ing dis­burse­ment un­der the ar­range­ment.

In com­plet­ing the re­view, the Board ap­proved the au­thor­i­ties' re­quest for waivers for the nonob­ser­vance of the per­for­mance cri­te­rion at end-2014 on the net in­ter­na­tional re­serves of the Cen­tral Bank of the Re­pub­lic of Guinea (BCRG) and for the per­for­mance cri­te­ria at end-2015 on the ba­sis fis­cal bal­ance of the govern­ment, the net do­mes­tic as­sets and the net in­ter­na­tional re­serves of the BCRG, the net do­mes­tic bank fi­nanc­ing of the govern­ment. The Ex­ec­u­tive Board also ap­proved the re­quest for waivers for the non-ob­ser­vance of per­for­mance cri­te­ria on the con­tract­ing or guar­an­tee­ing by the govern­ment or the BCRG of new medium and long- term non-con­ces­sional ex­ter­nal debt and on the in­tro­duc­tion or mod­i­fi­ca­tion of mul­ti­ple cur­rency prac­tices.

The Ex­ec­u­tive Board ap­proved the ECF ar­range­ment for Guinea on Fe­bru­ary 24, 2012, for SDR 128.52 mil­lion. Fol­low­ing the Board's dis­cus­sion on Guinea, Mr. Mit­suhiro Fu­ru­sawa, Deputy Man­ag­ing Di­rec­tor and Act­ing Chair, stat- ed: "Guinea was de­clared free of the Ebola epi­demic in end-2015, re­flect­ing the sus­tained ef­forts of the govern­ment and Guinea's civil so­ci­ety. The epi­demic has claimed thou­sands of lives, brought eco­nomic ac­tiv­ity to a stand­still, re­versed so­cioe­co­nomic gains, and ag­gra­vated poverty.

"Af­ter solid per­for­mance in 2014, pro­gram im­ple­men­ta­tion un­der the Ex­tended Credit Fa­cil­ity (ECF) weak­ened in 2015, mostly be­cause of the im­pact of the Ebola dis­ease, and a large pub­lic in­vest­ment pro­gram sup­ported by cen­tral bank guar­an­tees. Struc­tural re­forms also stalled, partly be­cause of dif­fi­cul­ties in se­cur­ing tech­ni­cal as­sis­tance. Growth is ex­pected to re­bound in 2016 to 4 per­cent, thanks to pent-up de­mand cou­pled with ro­bust agri­cul­tural growth. How­ever, given the sever­ity of the shocks that have hit Guinea dur­ing 2014-15 and de­pressed com­modi­ties prices, the re­cov­ery will be grad­ual.

"The au­thor­i­ties have taken strong ad­just­ment mea­sures to put their Fund­sup­ported pro­gram back on track. Go­ing for­ward, con­tin­ued ef­forts are needed to re­store macroe­co­nomic sta­bil­ity and sup­port the re­cov­ery, in­clud­ing struc­tural re­forms to im­prove the busi­ness en­v­i­ron- ment, par­tic­u­larly in the min­ing and elec­tric­ity sec­tors, and strengthen the de­liv­ery of pub­lic ser­vice.

"The broad-based fis­cal ad­just­ment en­vi­sioned in the 2016 bud­get is ap­pro­pri­ate, given the need to main­tain fis­cal sus­tain­abil­ity and strengthen the cen­tral bank's in­ter­na­tional re­serves. The re­cent re­form of the ex­change rate de­ter­mi­na­tion mech­a­nism will al­low the ex­change rate to fully play its shock ab­sorber role and safe­guard re­serves. The re­struc­tur­ing of some of the cen­tral bank guar­an­tees will free bud­getary space for so­cial pro­grams, in­clud­ing in the health sec­tor.

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