IMF extends US$63.6 million loan to Guinea - CNBC Africa

IMF extends US$63.6 million loan to Guinea

Western Africa

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IMF extends US$63.6 million loan to Guinea. PHOTO: Wikipedia

This brings Guinea’s total disbursements to 192.9 million US dollars under the International Monetary Fund’s (IMF) Extended Credit Facility (ECF) arrangement.

The IMF also extended the arrangement to end-December 2015. 63.6 million US dollars or 42 per cent of the funds will be used to enhance the West African country’s international reserves as well as cover the budget and urgent balance of payments as a result from the fight against the Ebola outbreak.

Naoyuki Shinohara, IMF’s chair and deputy managing director said, “Guinea has been experiencing a major humanitarian and economic crisis caused by the Ebola epidemic, but the authorities have responded appropriately.”

He explained that growth in 2014 for Guinea has slowed and inflation continues to decline despite the modest exchange rate depreciation and international reserves being maintained at an acceptable level.

“In a challenging environment, fiscal policy has remained prudent, despite a sizeable revenue shortfall and additional spending needs to combat the Ebola epidemic. Against this backdrop, poverty, which is already widespread, is estimated to have increased,” he added.

(READ MORE: Ebola shrinks West Africa's poorest economies)

However, Shinohara noted that performance under the ECF arrangement has been satisfactory as most indicative target for end-September were met.

Yet, progress in structural reform has been slow due to Ebola-related constraints on capacity and delays in the delivery of technical assistance

“Uncertainties about the impact and duration of the Ebola epidemic dampen the near-term macroeconomic outlook, and real GDP is projected to contract in 2015. The 2015 budget, which appropriates resources to combat Ebola and maintain a strong public investment effort, envisages an expansion in the fiscal deficit.

He added that the civil service wage agreement is within the limits of the 2015 budget but reduces the budget’s flexibility over the medium term.

“Going forward, the authorities should press ahead with their civil service reform to ensure that the wage bill remains affordable and creates space for priority expenditure.”

Shinohara added that the international community’s assistance through loans and technical assistance is still needed. Guinea’s authorities have committed to ensuring transparency in Ebola-related spending and completing their structural reform agenda.

 “The international community’s continued assistance, through the provision of highly concessional loans and grants and technical assistance, remains critical. The authorities’ commitments to ensure transparency in Ebola-related spending and complete their structural reform agenda under the program, to help underpin a revival in growth in the period ahead, are reassuring.

(READ MORE: IMF hopes for deal soon on debt forgiveness for Ebola countries )

Guinea’s Central Bank said it will relax monetary policy in order to provide adequate liquidity to the private sector given the downturn in growth.

“Growth and poverty reduction goals will be spurred by key reforms to strengthen the business climate, including in the mining and electricity sectors and through improved monitoring and supervision of the banking sector. Sustained efforts are also needed to strengthen the health sector and social safety nets,” he explained.