Guinea’s president Alpha Condé is moving the country towards a new IMF agreement and sovereign debt deal with Paris Club governments, following the government’s success in clearing its arrears to the World Bank.
The government will seek to raise more funds from mining companies in the wake of Rio Tinto’s payment of $700 million following a review of its contract to develop the huge Simandou iron ore mining scheme, a senior minister said.
Guinea forecasts a $20-25 billion investment spend in the next five years, as the economy emerges from what economic advisor Professor Paul Collier called its ‘acute on chronic’ state, and mining companies and others plough in support for the dramatically impoverished but resource-rich West African economy.
“We are in contact with the Paris Club, and we are asking for tolerance from governments on official debt,” finance minister Kerfalla Yansane told Emerging Markets. “We are not there yet but we hope to have a Paris Club deal by end-year... and an IMF deal as soon as possible.”
Meanwhile World Bank arrears - a major sticking point for donors - have been cleared, with the Bank providing some $70-75 million to unblock the situation. “We hope by end-year to line up the resources necessary to relaunch our plans. When you’re in the situation we were in, your international images degrades sharply and investors stay away,” Yansane said.
Data provided by Yansane show GDP growth of 4.9% in 2008 – the year long-time president Lansana Conté died – falling to -0.3% in the politically chaotic 2009 and 1.9% in 2010, when inflation stood at 20.9%. During the same period arrears rose from $36.5 million to $375.5 million.
Guinea’s much-improved image was highlight by African Development Bank (AfDB) President Donald Kaberuka. “I find it hard to describe Guinea as a ‘fragile state’ as it has such potential,” Kaberuka said.
“President Kaberuka is very shrewd and that shows in why he chose Guinea, of 50 African countries, to focus on here,” observed Collier, director of the Oxford-based Centre for the Study of African Economies, who has been advising the Guinea government along with billionaire George Soros.
Guinea holds two-thirds of the world’s bauxite reserves, and with RTZ’s Simandou scheme the world’s largest iron ore project, the potentials are huge.
Resources contracts drawn up by previous administrations are being reviewed and new mining and oil laws are in the works, to conform to Extractive Industries Transparency Initiative principles.
Asked about this by Emerging Markets, Yansane was insistent that “it is not our intention to undermine all contracts in Guinea. Our review will be on a case-by-case basis... and on bad contracts we will act, but we don’t want to break the system.”
Collier told Emerging Markets Guinea was a “very exciting example of a country that can be described using the medical term ‘acute on chronic’.
“It had long-term misgovernance and then a couple of years of truly deplorable military rule. Then at last we get the first democratic government in the country’s history – so it is a defining moment of transformation against this appalling legacy.”