Guinea. Economic analysis

The social-economic course is aimed at the realization of the Structural Adaptation Programme, started by IMF and World Bank and intended to give support to small and medium enterprises. The main development priorities are public health service (10% of budgetary allocations), education (25%), agriculture, road building and power engineering.

IMF and World Bank find the main parameters of Guinean economic development quite satisfactory. In the recent years there has been achieved a steady growth in the country's GDP at an average rate of 5%. The inflation is kept within 3-4%. Abundance of raw and mineral resources, powerful hydraulic potential (13 mln kWh) , 6 mln hectares of fertile land, large area covered with tropical forests (130,000 sq.km) and wild precipitation (1500-4000 mm per year) provide favourable conditions for economic development. Only 30% of farming lands are being tilled, 50 thousand cubic metres of timber are stocked. Continental and ocean waters form a secure basis for high-productive fishing industry. Guinean bowels conceal about 1/3 of the world's bauxite resources (25 bln tons). Estimated Guinean gold reserve reaches 1000 tons, diamond reserve - 25 mln carats, high quality iron ore- 12 bln tons. There have also been discovered rich deposits of nickel (73 mln tons), titanium, chrome, copper, uranium, graphite, corundum and others. Export of mineral resources accounts for $550 mln a year (80% of the total volume).

Even though the country obtains natural resources, it remains one of the least developed countries of the planet, occupying number 167 out of 175 possible. Its GNP is about $570 per head of the population. Over 40% of the population have an income of less than $300 a year.

Agriculture still has the priority in Guinean economy: more than 70% of Guineans are engaged in agricultural activities. The main crops and goods produced by Guinean agriculture are: rice (800 thousand tons in 1998), corn, peanuts, manioc, citrus plants, bananas, pineapples, mango, coffee, cotton, caoutchouc, palm oil. There is being pursued a policy of supporting private farms and small, reliable, sure to pay off projects with foreign financial help.

Stock-breeding is not very productive, but at least provides all the meat for the domestic market. You can count up to 1.6 mln heads of horned cattle, 40 thousand pigs, 5 mln fowls. Fishing has a bigger economic potential (up to 220 thousand tons per year) but it hasn't undergone the necessary development and has by now turned into a home industry that can satisfy only 70% of the domestic demand for fish products.

Guinean industry is built up of various branches, the most important of which is mining (16% of GDP) followed by food industry, timber industry and chemical branch. Guinea is the world's second exporter of raw materials needed for aluminum industry - 15.6 mln tons of bauxites and 62 thousand tons of alumina per year. The leading factories are: "The bauxite company of Guinea" (USA, France, Canada and a number of other western countries invest in it), an alumina plant in Fria (mainly French investments) and a bauxite extraction factory in Kindia built with the cooperation of the former USSR.

Gold extraction reaches about 8 tons per year. Most of the diamonds are extracted privately (360,000 carats per year). However, there is a Guinean-Australian company "Aredor" which has lately been the biggest enterprise engaged in this business (70 thousand carats).

Transportation. At the disposal of a Guinean driver there are 6,825 km of nationally important roads, including 2,000 km of roads with hard surface, about 2,000 concrete and iron bridges and 29 ferry crossings. There are about 120,000 automobiles in the country. Railways are presented by a transnational 662 km railway Conakry - Kankan, which was built in the early 1900s and nowadays calls for immediate reconstruction, and two other branch-lines used to transport bauxites and alumina to Conakry and Kamsar seaports.

Communications. In April, 1998 a global telephone system GSM-900 was put into operation. The Internet connection was also established.

Education. Illiteracy rate among adults is 70%. School education embraces only 51% of potential schoolchildren. There are Universities in Conakry and Kankan, a Mining and Geologic Institute in Boke, a teacher-training college in Manea and an Agricultural Institute in Faranah.

Medical care system is marked by ill-developed infrastructure, lack of trained personnell, very expensive treatment and medicine. Primary medical care is provided for 92% of the population, but the drinking water supply is very low - down to 55% Life expectancy at birth is 45,5 years.

Financial situation. Dependence on external money sources is still very high. They help to cover the budget deficit and secure 85% of investment programmes. The 1998 budget deficit reached 3,6% of GDP, the external debt totalled $2,676 mln, inflation made 4% while GDP growth rate reached 4.9% Gold and foreign exchange reserves grew by 19%

Interbational trade. Bauxite and alumina make 60% of the export. Gold, diamonds, coffee, fish, pineapples, mango and citrus plants also play an important role in Guinean export. The imported goods are: various commodities of mass consumption and the necessaries of life (31%), machines and equipment (25%), raw materials and semi-finished products (24%), oil products (14%) More than 60% of the export and about 90% of the import fall on USA, Canada or the countries of Western Europe. In 1998 trade deficit made $158 mln. France is Guinea's most important trade partner.

State budget. On March 25, 1999 the draft state budget that had been submitted to the National Congress by the government was finally passed after a three month delay. Additional allocations were assigned for the maintenance of Guinean foreign missions and for satisfying the pressing needs of higher and specialized education. The new budget put right the mistake of the previous year and provided for special reserve funds to finance the peace-making policy in the West-African region (in 1998 the Guinean armed force contingent cost the country $12 mln, which exceeded the expected outlay by more than $7 mln). The budget also envisaged an increase in expenditures on armed forces by approximately $1.2 mln. This sum also covered the national debt to the army.

Total 1999 budget revenue reached $434 mln, which is 11% higher than the previous year. 80% of the treasury earnings are from internal and custom duties. They exceeded the previous year's fiscal duties by 16. 3% A part of it came from the noticeable increase in taxation of private car and housing owners, and the other part was the taxation of real estate deals.

Total 1999 government expenditures were approximated at $722 mln. In the report that Minister of Finance I.K.Fofan made in the National Congress he pointed out the insignificant increase in the expenditures and assured the Congress that it was intended for the growing needs of national security, national defence and the consistent struggle against poverty.

The expenditure articles envisaged all the needed spending and realization of investment programmes. The current outlay totalled $432 mln and provided for the fulfilment of Guinean promise to keep paying back the national debt ($185 mln), maintenance of the state apparatus ($152 mln), administrative system ($69 mln) and accidental expenses such as making up for consequences of national calamities ($26 mln). Besides that, part of the expenditure increase came from indexating the pensions (3%) and the administrative workers' allowance (4%) in July 1st, 1999.

Investment programmes call for $289. 9 mln. Like in previous years, the bulk of the funds will be coming from outside the country. The budget will back up 191 projects including 49 new projects.

The government plans to cover the deficit of $287.7 mln which accounts for 5.9% of GDP and which is shown in the budget with expected donations ($91.1 mln), foreign loans ($174.3 mln), domestic loans ($7.7 mln) and other earnings ($14.6 mln). Another tool to cover the budget deficit are the treasury bonds issued beginning April 1, 1999 under the government guarantee and with the approval of Bretton Woods financial agencies. The quoted rates are 5.5% and 7.5%, the period of payment being six and twelve months, respectively.

The state budget developed by the government for the year 1999 relies on the criteria of the Global strategy of the national economic progress for the period up to the year 2010 and is focused on the fulfilment of the three-year Structural Adaptation programme by 1999. The government hopes that the execution of the budget in compliance with these plans will allow the nation to reach the quoted macro-economic parameters, namely, the GDP is to grow by 5%, payments deficit is to amount to 7.3% of the GDP, the inflation is to be restrained within 4%, and the hard-currency reserves are to cover import needs for 3.5 months.