Guinea. Economic analysis

Relations with the WB and IMF. The desire of Guinean leaders to raise the national economy up to an entirely new level of international trade and credit-finance relations demanded that the state policies with regard to the Bretton Woods financial agencies should be altered. The earliest period of these policies covers the first years of the Konte regime. Particularly, it had to do with the development and realization of the first Programme of Structural Reforms (PAS-I) in Guinea in 1986-1989. The targets described in this Programme were approved by the IMF and the WB, which allowed Guinea to get an access to foreign credits. These major targets included a more liberal economy, a financial reform, a restricted role of the state in exercising control over enterprises, mobilized domestic resources and a revival of the private sector of the economy.

PAS-I having been accomplished, the profound economic reforms were continued. The IMF approved the next programme, PAS-II, for the years 1989-1991 and the so-called "reinforced" programme FAS-R for the years 1991-1994 and granted Special Drawing Rights (SDR) for $57.9. The additional tranche of $17.5 mln of SDR grant (sept. 1994) made it possible to prolong the programme till middle '95. But the payoff that the IMF expected to recieve never came and the attempt to achieve the set macroeconomical indices was a failure. Due to this fact the relations with the Fund were suspended until the second half of 1996 when a new technocratic Cabinet of Ministers headed by S.Toure was being formed. The Cabinet's policy was economically successful and had a slight stabilizing effect which stimulated a wide investment flow into Guinean economy. The total amount of foreign money attracted into the country in 1997 reached $900 mln, including the significant investment made by the IMF ($103 mln) and the WB ($92 mln).

The session of the Advisory Committee of Paris Club which took place in Paris in June 1998 confirmed the decision to fulfil its commitment, i.e. to allow Guinea a total of $1,275 mln credit and debt relief, and promised to support additional $700 mln fund-raising till the end of the year 2000. In their turn, the IMF and the WB undertook responsibility of lending to Guinea $64 mln and $120 mln respectively. An important credit condition was that Guinea would comply with its obligations of debt service (controlled by the IMF) and shortening the payback delays.

The analysis and the evaluations undertaken by international financial institutions in order to sum up the main results of Guinean economic development in the year of 1998 witnessed the successful achievement of the 1996-1999 Programme's macroeconomic indices. Along with that, by the end of 1998 it had become evident that the progress couldn't eliminate some negative tendencies in the budgetary-financial field of the weak economy. The problems were caused by crises in the neighbouring Sierra Leone and Guinea-Bissau and excessive spending on the presidential elections of December, 1998. As the result, the $11 mln budget deficit was overcarried to 1999. In the beginning of the year 1999 real public spending exceeded the anticipated figure by 12% which led to an overall state budget deficit of $21.6 mln. The IMF panels in February and May of 1999 recommended the Guinean leaders to take prompt measures to eradicate the existing defects and blocked the next tranche until the situation has clarified in September.

After the halt of money flow Guinean economy faced a steady growth of credit balance that stroke a serious blow to the general social-economic situation, spurred the fall of national currency and escalation of inflation. The negative tendencies were leading to an inevitable decline of the people's purchasing power.

The government had to resort to state budget correction. In July 1999 the Cabinet of Ministers adopted the amendments to the state budget, but they still needed to receive the Parliament's approval. The amendments secured the $5 mln increase in budget receipts and guaranteed that the spending would be cut down by $2 mln. The sequestration of budgetary expenditures would first of all influence the articles that were directly connected with payment of wages, social problems solutions and armament spending.

Economic partnership with the countries of Western Europe. About 1/3 of Guinean export and import falls on the countries of the European Union. The bigger part of financial-economic and technical help comes from Western-European institutions. In accord with its commitments as a member of Advisory group of Guinean investors (Paris, June 1998) the EU is planning to allot gratis $249 mln for the development of the economy of Guinea in the time period of 1998-2000. Moreover, in the next three years Guinea will obtain a series of credits totalling $60 mln from the European Bank of Investments (BED). The allocated money is supposed: 1. to make up for the heavy losses the country's economy has suffered because of a decrease of world prices for aluminum industry raw materials, 2. to have a stabilizing impact on the social-economic situation. France promised to extend $116 mln to the Guinean government before the end of the millenium. When French Minister for Cooperation and Francophony Affairs J.Joslens visited Conakry in 1998 the sides discussed several joint social-economic programmes. The visit resulted in signing an agreement in which France confirmed its intention to allot gratis 3 mln French francs to Guinea.

Economic relations and contacts between Guinea and France are deep and many-sided, embracing practically all fields of economic domain. Striving to develop and strengthen these ties is a business of many authorities, non-governmental organizations, commercial structures and some private individuals.

There have been signed and are functioning numerous government-to-government agreements between the two countries. Among them: Agreements on economic cooperation (1979), on cultural cooperation (1987), on cooperation in military and technological branches (1985). In accord with the latter, 24 French military specialists are staying and working in Guinea. 350 companies based on French capital are functioning in Guinea, about 1,500 French citizens live there. Guinean colony in Paris counts about 6,000 people. France is by far Guinea's first investor. The total sum of money France has invested in Guinea since 1958 amounts to $1 bln. Despite many write-offs and remissions, national debt of Guinea in 1999 made up about $330 mln. Guinea is France's 17th largest African trade partner. Guinea's overall export puts the country on the 97th line of the world list, while its import statistics let it step on line 79. France's ratio in overall Guinean import works out at 20%, export - 10%. France's export is mainly fertilizers, oil products, medicine, cars and special equipment, flour, sugar and others. From Guinea to France are transported: bauxites, seafood, coffee, cocoa, and other item on the sum of 400 mln French francs a year. Guinea's deficit in its two-way foreign trade is more than 450 mln French francs.

Unlike the majority of French-speaking countries of the West-African region, Guinea has a currency of its own and doesn't belong to the French franc zone. The local structure of financial bargains suits US dollar best. In 65% of all external payments American currency is preferred to any other. Franc's ratio is 20-25%, while the rest falls on yen, Deutsche Mark and British pound.

Among the problematic questions of the bilateral relations between Guinea and France we should mention the following: French claims of some immovables they had once owned, different approaches to the use of financial flows and to the conditions of privatization of some Guinean enterprises, involvement of two French oil companies - "Elf Aciten" and "Total" - in the tax scandal that broke loose in Canakry a year ago.

The relations between Guinea and Germany are also quite serious and deep. During the visit of Guinean Minister for Planning and Cooperation to Germany the German side confirmed its willingness to continue providing financial help for the development of education, for the needs of medical system, domestic crafts and geological exploration. A sum of 41 mln marks was set aside for this aim and was to be transferred to Guinea in the years 1998-1999. Germany agreed to finance several hospitals' equipment in Conakry (7 mln marks), realization of structural reforms in the economic sphere (10 mln marks), additional work on the improvement of the Conakry power supply system (3 mln marks) and the allowance of all the experts sent to Guinea to work on the project of widening the Conakry seaport or fitting out the national radio and TV complex.

The economic relations with the countries of Benelux (9% of the import), Spain and Ireland (9% of the export each) are steady. Financial help comes from Denmark ($3 mln for social development), Luxembourg ($0.6 mln for education, public sphere and construction), Italy ($0.5 mln for agricultural and fishing programmes as well as environmental protection), Austria ($100,000 for the solution of humanity problems). Every year Geneva gives considerable help to its sister-city Conakry (to the post department in 1998, to the fire-fighting service in 1999).

As far as the Western-European diplomatic missions are concerned, there are embassies of France and Germany, honorary consular representations of Great Britain, Denmark, Luxembourg, Norway, Turkey, Switzerland, Sweden and a special EU mission. There are Guinean missions in Paris, Bonn, Brussels and Geneva.