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INTERNATIONAL MONETARY FUND APPROVES CREDIT FOR GUINEA

       INTERNATIONAL MONETARY FUND APPROVES CREDIT FOR GUINEA
    WASHINGTON, Nov. 7 /PRNewswire/ -- The International Monetary Fund has approved a credit equivalent to special drawing rights (SDR) 57.9 million (about US$79.9 million) for Guinea under the IMF's enhanced structural adjustment facility (ESAF)(A) in support of the country's three-year economic and financial reform program.  SDR 17.37 million (about US$23.9 million) will be available to support the first annual economic program, to be disbursed in two equal semiannual installments.
    In 1985, the government of Guinea began to shift toward a market- oriented system by initiating wide-ranging financial and structural reforms.  These reforms were supported by financial and technical assistance from the IMF and other multilateral and bilateral institutions.  The macroeconomic situation improved significantly through 1987, but the momentum of the adjustment effort and the reform process weakened considerably thereafter.  Consequently, external imbalances widened considerably, while fiscal imbalances remained large.  Sizable domestic and external payments arrears were accumulated.
    The medium-term program for 1991-94 is designed to diversify economic activity and reduce the excessive dependence of government revenue and export earnings on bauxite mining by encouraging the development of the nascent private sector.  The main macroeconomic objectives are to achieve an average annual growth in real GDP of at least 5 percent, progressively reduce the rate of inflation to 8 percent in 1994, and narrow the external current account deficit to 4.2 percent of GDP by 1994.  To attain these objectives, the program entails the implementation of tight fiscal policies, including a reinforcement of tax collection and control over expenditure, as well as a careful assessment of the investment priorities for the rehabilitation and expansion of basic economic and social infrastructure.  Monetary policies will also remain tight, and key interest rates will be kept above the rate of inflation.  Incentives to production will be strengthened by maintaining external cost competitiveness and appropriate domestic pricing policies.
    The program places major emphasis on structural reforms, with a view to improving the financial position of the public sector and enhancing economic efficiency.  Key areas of policy action include administrative reform, the restructuring of public enterprises, the strengthening of the financial sector, and continuation of the privatization process.
    The first annual program, covering the period July 1991-June 1992, aims at containing the external current account deficit and reducing the rate of inflation, while maintaining the growth of real GDP at 4-5 percent.  The authorities intend to normalize relations with their external creditors through the elimination of payments arrears and the restoration of orderly debt servicing.  The program objectives will be supported by tight fiscal and monetary policies. These measures will be accompanied by wide-ranging structural reform measures, such as an overhaul of the civil service roster and payroll management system; completion of the privatization of the distribution network for petroleum products; the restructuring of several key public enterprises; and the reorganization of the post and telecommunications sectors.
    The authorities attach considerable importance to protecting budgetary expenditure for the social sector, especially health and education.  During 1991-92, outlays on health and education will increase markedly.  Policies will be geared toward primary education and the provision of basic health care, as well as the development of preventive medicine.  Short-term adverse consequences of the economic reform program for selected segments of the population will be addressed through the strengthening of the government's social policies and the provision of temporary benefits to redundant workers in the public sector.  Over the medium to long term, the promotion of private-sector activities and better incentives for agricultural production will help to generate higher incomes and reduce poverty.
    Guinea joined the IMF on Sept. 28, 1963, and its quota(B) is SDR 57.9 million (about US$79.9 million).  Guinea's outstanding financial obligations resulting from past operations and transactions currently total SDR 30.5 million (about US$42.1 million).
    (A) The ESAF is a concessional fund lending facility for the poorest members that are undertaking economic reform programs to strengthen their balance of payments and improve their growth prospects.
    (B) A member's quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing and its allocation of SDRs.
    -0-               11/7/91
    /CONTACT:  International Monetary Fund, External Relations Department, 202-623-7100/ CO:  International Monetary Fund ST:  District of Columbia IN:  FIN SU: TW-DC -- DC012 -- 2161 11/07/91 11:10 EST
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Publication:PR Newswire
Date:Nov 7, 1991
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