IMF, World Bank Support $2.1 Billion Debt Relief for Guinea

Guinea's annual average debt service reduced by more than 60 percent

Debt relief highlights progress in policy management, performance

IMF urges structural reform to maximize benefits from expected mining boom

The Executive Boards of the two institutions agreed that Guinea had reached the final stage, or completion point, of the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative. As a result, the west African country will benefit from debt relief under the HIPC Initiative and the Multilateral Debt Relief Initiative (MDRI), and from additional relief from bilateral creditors.

Total external debt service savings amount to $2.1 billion over 40 years, corresponding to a reduction of 66 percent. Multilateral creditors contribute 70 percent of the relief being provided, with the remainder coming from bilateral and commercial creditors. Debt relief provided by the World Bank’s International Development Association and the African Development Bank under the MDRI would save Guinea $964 million in debt service over 40 years (see chart).

Debt indicators

Guinea’s debt indicators will improve substantially as a result of the move. The ratio of the present value of future debt service to GDP will fall from about 50 percent at end-2011 to 13 percent at end-2012; and the ratio of the present value of future debt service to exports will be reduced from 186 percent to 49 percent, respectively, for the two periods. Guinea’s graduation under the enhanced HIPC Initiative brings to 34 the number of countries that benefited from its debt relief (see box).

Afghanistan

Benin

Bolivia

Burkina Faso

Burundi

Cameroon

Central African Republic

Republic of Congo

Democratic Republic of Congo

Cote d’Ivoire

Ethiopia

The Gambia

Ghana

Guinea

Guinea-Bissau

Guyana

Haiti

Honduras

Liberia

Madagascar

Malawi

Mali

Mauritania

Mozambique

Nicaragua

Niger

Rwanda

São Tomé and Príncipe

Senegal

Sierra Leone

Tanzania

Togo

Uganda

Zambia

To reach the completion point under the HIPC debt relief initiative, Guinea had to meet specific targets relating to poverty reduction, macroeconomic management, and institutional reforms.

• Poverty reduction: preparation of a poverty reduction strategy in a participatory process, and satisfactory implementation of that strategy for at least one year

• Macroeconomic stability: good performance under the economic program being supported with financing under the IMF’s Extended Credit Facility

• Transparent governance: publication of annual...