Guinea set to borrow $200 million from IMF

West African country could get some debt cancelled in next few years, but new loans to pay old loans will not be included.

Guinea has reached an agreement with the IMF to borrow $198.9 million over the next three years.  The agreement puts Guinea back on track to complete the Heavily Indebted Poor Countries initiative. The IMF has not released an estimated completion date, but it is likely to be well into 2013 at least. To do so, Guinea will have to stay on-track with implementing conditions set by the IMF loan.

Guinea fist entered the Heavily Indebted Poor Countries (HIPC) initiative in 2000. In late 2008 there was a military coup. In late 2010, elections were held with opposition leader Alpha Conde ultimately being declared winner. Despite the violence and instability, Guinea's government has kept making debt payments, which have averaged more than 25 per cent of government revenue since 2000.

Much of the new lending is likely to be used to meet such debt payments, as is currently the case with IMF lending to Cote d’Ivoire. The new loans will not be eligible for debt cancellation if and when Guinea completes HIPC; some of the country's large debt burden will remain even after 'debt cancellation'.

The IMF say that conditions of the new loan include:
• Reform of the tax system to boost non-mining revenues
• ‘Reorientation’ of spending towards public investment and social spending
• Reducing inflation through tighter monetary policy, ie, higher interest rates