The International Monetary Fund (IMF) has approved $23.5 million disbursement for Guinea amid coronavirus economic instability. The approval brings total disbursements under an extended credit facility (ECF) for Guinea to $117.6 million.
An extended credit facility (ECF) allows the borrowing country to take out money over an extended period of time rather than reapplying for a loan each time it needs money.
In making the approval, IMF said while performance under the Fund-supported program remains broadly satisfactory, Guinea faces significant downside risks related to COVID-19 pandemic.
The Fund will remain closely engaged with the Guinean country authorities as the situation evolves, and as the authorities further develop their policy responses and financing needs change, IMF said.The ECF arrangement supports strengthening Guinea’s resilience, scaling-up growth-supporting investment and social-safety nets and promoting private sector
“Beyond immediate needs created by the COVID-19 crisis, creating fiscal space for priority
spending will be pivotal to foster broad-based growth in the years to come. Achieving a basic fiscal surplus in 2020 will contribute to containing inflation and preserving debt sustainability,” said Mr. Mitsuhiro Furusawa, Acting Chair and Deputy Managing Director at the IMF.
He said mobilizing additional tax revenues and reducing un-targeted electricity subsidies will generate resources to scale-up public investments and strengthen social safety nets.
“To this end, implementing programmed tax revenue measures, adopting an automatic petroleum prices adjustment mechanism, and advancing the multi-year tariff electricity tariff is key. Prudent external borrowing strategy will support scaling-up public investments, notably in infrastructure. Strengthening public investment management will support the fiscal strategy and enhance governance,” Furusawa added.
According to him, allowing greater exchange rate flexibility is important to preserve buffers against external shocks.
“Continuing to limit central bank interventions in the foreign exchange market will be important. Reforms to strengthen market forces in the foreign exchange market have
progressed well. Moving ahead with the implementation of a rule-based central bank’s
intervention strategy will reduce discretion.
“Continuing to limit central bank’s lending to the government in line with program objectives is needed to reduce inflation. A more active liquidity management will also support achieving monetary targets. Strengthening banking supervision and regulation will support financial stability,” Furusawa said.